The Centre for the Promotion of Private Enterprise (CPPE) has strongly criticized the Central Bank of Nigeria's (CBN) latest decision to raise interest rates, arguing that it will harm businesses and stifle economic growth.
On September 24, 2024, during its 297th meeting, the CBN's Monetary Policy Committee (MPC) announced a fresh rate increase by 50 basis points to 27.25 percent. This marks the fifth consecutive hike this year, aimed at combating persistent inflationary pressures.
Muda Yusuf, the Executive Director of CPPE, expressed deep concern over the impact of the increased monetary policy rate (MPR) on the economy. He stated, "The economy needs oxygen and stimulus, not policy measures that would worsen an already suffocating situation."
Yusuf emphasized that the private sector should not be penalized for the actions of the public sector, noting that the injection of liquidity into the system is largely public-sector driven.
Yusuf further highlighted that the new monetary conditions are extremely difficult for businesses to bear, given the prevailing macroeconomic challenges. He warned that the increase in the cash reserve ratio (CRR) from 45 percent to 50 percent, combined with the elevated MPR, would exacerbate the cost of funds for investors, potentially pushing it above 35 percent. This, he argued, would make it even more challenging for businesses to access financing, thereby hindering investment and economic recovery.
"The operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening," Yusuf added. He called for policy measures that would support economic recovery rather than stifle it, urging the CBN to reconsider its approach to addressing liquidity issues within the context of public-sector-driven excess liquidity.
Opmerkingen