Victor EzejaThe Central Bank of Nigeria (CBN) has been advised to suspend further hike of the benchmark interest rate because of the impact on the economy.
This comes as the CBN Monetary Policy Committee (MPC) holds its 296th meeting today, Monday, 22 July, and Tuesday, 23 July 2024.
Join our WhatsApp ChannelThe CBN had in the last three MPC meetings hiked interest rates by a record combined 750 basis points from 18.75 per cent to 26.25 per cent.
The apex bank had in the first MPC meeting held in February this year, raised the Monetary Policy Rate (MPR) by a 400 basis points hike from 18.75 per cent to 22.75 per cent. It further increased the MPR by another 200 basis points to 24.75 per cent in March and the last one by 150 basis points hike in May.
While the CBN maintained that it was necessary to tame the stubborn inflation, economic analysts have averred that it has far reaching negative impacts on economic growth in the country.
Despite previous hikes of the benchmark interest rate, the inflation rate has continued on an upward trajectory. Latest data released by the National Bureau of Statistics (NBS) show that headline inflation hit 34.2 per cent in June from 33.95 per cent recorded in May 2024.
Speaking in an interview with the News Agency of Nigeria (NAN) on Sunday, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said it will be in the best interest of the country if the apex bank’s MPC does not further increase the interest during the meeting.
READ ALSO: Nigeria Spends More On Debt Servicing Than Capital Expenditure, Personnel Costs In Q1
Dr Yusuf said CBN’s disposition suggests that it might hike the interest rate though marginally.
While acknowledging the efforts of the CBN in stabilising the economy, the economic expert said he wished the bank would not go ahead to do so.
“Knowing the disposition of the Central Bank of Nigeria, given the fact that the bank has repeatedly affirmed its commitment to taming inflation, there is a very high probability that the MPC is likely to hike interest rates, although it may be marginal,” Yusuf stated.
“My wish is that the central bank should put a hold on interest rate hikes for now. I believe that monetary policy instruments have been practically over-stretched in this quest to tame inflation,” he added.
The CBN Governor, Dr Olayemi Cardoso, had earlier vowed that the monetary authority would continue to do all it could to bring down inflation, with a target now set at below 25 per cent.
The aim is to bring down the inflation rate and stabilise foreign exchange rate which, after dropping a few months ago, is now reaching almost 1,600 naira per dollar in the official market.
One of the benefits of the monetary policy tightening so far, according to analysts, is the attraction of significant forex inflows into the government securities.
This is as the country recorded 237 per cent in foreign portfolio investment in the first quarter of 2024 as indicated in NBS data released recently.
However, businesses in the private sector have been lamenting about the high cost of borrowing and the spiral effect on the cost of production and prices of goods and services across the country.
READ ALSO: How CBN’s New Monetary Policy Rate Will Affect Businesses In Nigeria – Economic Experts
Among them is Africa’s richest man, Aliko Dangote, who stated that no economic growth will occur with bank interest rate at 30 per cent. Also, the Manufacturing of Association of Nigeria Director, Segun Ajayi-Kadir, lamented that it has created serious limitations in access to credit and the few companies that can afford to, are forced to pass on the costs.
A couple of companies had shut down in the country within the last few years due to rising challenges in the business environment including high cost of borrowing.
The Lagos Chamber of Commerce and Industry (LCCI) is also of the view that further increasing the interest rate will raise concerns in the business community about the impact so far.
LCCI Director General, Dr Chinyere Alumona, urged the authorities to look at both the fiscal and monetary side in tackling inflation as the cause is mainly supply-side deficiencies.
“The Chamber’s view on the current fight against inflation is that the monetary and fiscal authorities should focus on the factors driving the inflation rates by tackling the supply-side deficiencies instead of focusing too much attention on the demand-side management,” Alumona stated.
“We urge the CBN to continue with its FX market reforms to a conclusive end, as the high exchange rate against the naira is a major culprit in the skyrocketing inflation rates,” she added.
As the MPC concludes its meeting on Tuesday, 23 July, the country awaits the outcome and how it would affect the economy.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
Follow Us