MPR: LCCI seeks intervention to boost productive sectors

By Merit  Ibe

Following the hike in Monetary Policy Rate (MPR), the   Lagos Chamber of Commerce & Industry (LCCI) has urged the Central Bank of Nigeria (CBN) to expand its targeted intervention schemes to support the productive sectors of the economy to reduce the cost of production.

The   Director-General,    Dr. Chinyere Almona, who made the statement recently, noted that beyond the role of price stability, the CBN must pay attention to sustaining economic growth that can create jobs and boost government revenues.

“Again, we reiterate that hikes in rates alone will not tackle the near-galloping inflation trend in Nigeria. We need interventions to boost the supply of goods and services, build critical supportive infrastructure and resolve the illiquidity crisis in the forex market.”

Noting that the increase  was meant to control the rising inflation rate feared to assume a galloping trend soon, Almona explained that the CBN has always maintained that the  high inflation rate was due to non-monetary factors outside its purview.

“We have consistently pointed at factors responsible for the rising inflation including an epileptic supply of Premium Motor Spirit (PMS), high cost of Automotive Gas Oil (AGO/Diesel), electricity tariff hikes, insecurity and the illiquidity crisis in the foreign exchange market.”

These factors have continued to put pressure on the cost of production translating to higher prices or cost-push inflation. These headwinds must be tackled head-on for the inflationary pressure to be tamed sustainably.

“The hike in the interest rates will normally mean less credit to the private sector and that can translate to reduced investment and constrained production in the economy, at least in the short term.

“This action also has implications for economic growth, job creation and revenue generation for the government. When the MPR was 11.5 per cent some credit lenders charged as high as 25 per cent  maximum rate to small companies. With the benchmark interest rate at 13 per cent, we may likely have rates climb beyond 30 per cent for SMEs.

While we agree with the proposition that a lower interest rate in Nigeria compared with higher rates in developed economies would lead to capital flight, we must restate our recommendation that interest rate hikes will not on their curb inflationary pressures. 

“The supply-side challenges like insecurity, forex scarcity and uncertainties from the inconsistent policy environment must be tackled to curb the rising inflation. This is more sustainable. solution to the rising inflation in Nigeria.”