ν Says rate paralysing manufacturing, business activities
By Merit Ibe
The Manufacturers Association of Nigeria (MAN) has expressed concern over the impact of Monetary Policy Rate on the manufacturing sector and the economy at large, saying the decision of the Monetary Policy Committee (MPC) was paralysing the manufacturing sector and worsening macroeconomic instability.
The MPC of the Central Bank of Nigeria (CBN) convened its 295th meeting on May 20 and 21, 2024 and reached a decision to further tighten monetary policy rate. They further raised the interest rate by 150 basis points, from 24.75 percent to 26.25 percent. Moreover, the committee opted to maintain the Cash Reserve Ratio (CRR) of Deposit Money Banks at 45.0 percent and retain the Liquidity Ratio at 30.0 percent.
While acknowledging the efforts of the MPC in confronting the economic challenges facing the country, notably the fluctuations in inflation and exchange rates, it however pointed out that while MAN understands the reason behind the MPC’s decision, it is crucial for the committee to thoroughly assess the potential impact on the real sector and the multiplier effect on the nation.
President of MAN, Francis Meshioye, at a media forum in Lagos, lamented the negative effects of these decisions on the manufacturing sector, leading to disruptions in production, reduced investments and uncertainty about the future.
He highlighted challenges such as foreign exchange volatility, rising energy costs and food insecurity, which have contributed to inflationary pressures and weakened the competitiveness of the manufacturing industry.
Meshioye emphasised the need for a thorough assessment of the impact of monetary policy decisions on the real sector and the economy as a whole.
He called for collaboration between monetary and fiscal authorities to support the manufacturing sector in driving employment, productivity, forex earnings, and economic growth.
The association urged the MPC to explore alternative measures to address inflationary pressures and consider targeted interventions to alleviate the financial burden on manufacturers.
Suggestions included prioritising forex and credit allocation to manufacturers, investing in infrastructure within industrial hubs, promoting renewable energy sources, and incentivising local sourcing to reduce reliance on imports.