Members of the country’s organized private sector have called the latest increase in the country’s benchmark interest rate an unfortunate development, claiming that it will worsen the business crisis, lead to job losses, and slow economic growth. They spoke against the backdrop of the Monetary Policy Committee’s decision to raise the Monetary Policy Rate from 16. 5% to 17.5% despite a slight drop in inflation in December 2022. The decision was made at the MPC’s first meeting of 2023, with the committee citing inflation fears as the reason.
The announcement came exactly one month before the 2023 general election, which is scheduled for February 24. During the most recent MPR meeting in November 2022, the CBN raised the benchmark interest rate to 16.5% in order to combat inflation, which had risen to 21.9% in October 2022. The Nigerian Association of Small Scale Industrialists, the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, the Nigeria Economic Summit Group, and the Nigerian Employers Consultative Association all criticized the MPC’s interest rate increase.
Segun Kuti-George, National Vice President of the Nigerian Association of Small Scale Industrialists, described the decision to raise the benchmark borrowing rate as having unintended consequences for the productive sector. It will raise production costs once more. In addition, in an interview with The PUNCH, the Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu, stated that the decision would indirectly cause a cost-push inflation that would defeat the primary reason behind the rate hike in the first place
Obadimu said, “The effort is geared towards taming inflation. Also, a professor of Capital Market and Chairman of the Chartered Institute of Bankers of Nigeria, Abuja Branch, Prof Uche Uwaleke, said the hike in the MPR by another 100 basis points to 17.5 per cent was not cheering news for struggling businesses as well as output growth in general.
“It is obvious that the CBN is heeding the advice of the IMF at the just concluded World Economic Forum where the global financial body urged Central Banks not to pause their aggressive monetary stance. “The CBN’s decision to raise the MPR to 17.5 per cent on the premise of further tightening the monetary policy is ill-timed.