The Manufacturers Association of Nigeria (MAN) has said the recent hike in lending interest rate to 13 per cent by the federal government will limit access to funds by businesses, increase cost of input and cripple businesses.
Director-general, MAN, Segun Ajayi-Kadir, in a statement, said the new Monetary Policy Rate (MPR) meant another level of increase in interest rates on loanable funds, making it tight for private businesses to access funds in the credit market.
He said the development is not “manufacturing-friendly” considering the myriad of constraints already limiting the performance of the sector.
“The key rationale for upscaling the MPR stems from the need to curb the rising rate of inflation that recently peaked at 16.8 percent, ensure relative stability, and sustain economic growth in the face of the high-level uncertainties in the global economy.
“However, the development is expected to intensify demand crunch, increase the cost of manufacturing inputs, worsen the already declining profit margin of private businesses and heighten the mortality rate of small businesses.
“It would further reduce capacity utilisation, upscale the rate of unemployment, insecurity and reduce the pace of full recovery of the real sector, making manufacturing performance remain lacklustre and lead to a leaner contribution to the GDP,” Ajayi-Kadir said.
The director general called on the CBN to ensure that future adjustments of MPR take into consideration the trend of core inflation.
He further stated that deliberate considerations would build up production and guarantee sustained growth in the overall best interest of the economy.
“Consequently, manufacturers are hopeful that the stringent conditionalities for accessing available development funding windows with the CBN will be relaxed to improve the flow of long-term loans to the manufacturing sector at single digit interest rate,” he added.
