The Central Bank of Nigeria (CBN) has raised its benchmark Monetary Policy Rate (MPR) to 26.75% from 26.25% in an effort to combat rising inflation. The decision, announced by CBN Governor Mr. Olayemi Cardoso, has been met with criticism from the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), the Nigeria Employers’ Consultative Association (NECA), and investment analysts, who argue that the rate hike could negatively impact businesses by increasing borrowing costs and reducing investment.
Despite the criticism, the CBN defended its policy, highlighting a 234% year-on-year increase in capital importation to $5.92 billion and a 62% year-on-year rise in Diaspora remittances to $2.43 billion in the first half of 2024. The central bank also reported a rise in external reserves to $37.05 billion. The CBN is committed to addressing inflation through monetary policy and collaboration with fiscal authorities, including measures to boost domestic food production and support small and medium enterprises (SMEs).
Critics argue that higher interest rates could lead to increased operational costs for businesses, reduced investment, and lower consumer spending, which may hinder economic growth. NACCIMA and NECA have expressed concerns that the rate hike could exacerbate challenges for businesses and impact their ability to invest and grow.
(VANGUARD)