The Manufacturers Association of Nigeria has said the increase in Monetary Policy Rate to 18.5 per cent in May by the Monetary Policy Committee of the Central Bank of Nigeria has negative effect on the manufacturing sector and the economy generally.
This position was contained in a statement issued by MAN and.signed by its Director-General, Dr. Segun Ajayi-Kadir, a copy which was made available to NOTM online in Lagos.
The manufacturers noted that the Monetary Policy Committee of the CBN.raised the Monetary Policy Rate (MPR) to 18.5 percent in May 2023 from 18 percent that was fixed at the 290th meeting of the committee held in March, 2023.
MAN had quoted the Governor of Central Bank, Mr Godwin Emefiele as saying that the decision is to curtail the rising inflation in Nigeria, the rate which stood at 22.22 per cent as released by National Bureau of Statistics in April 2023.
The manufacturers had however said that this MPR increase which was the 7th in a trend, had not stopped inflation as “inflation rate continues to rise despite the increases.”
MAN explained that “This is a clear indication that the policy tightening is not effective in curbing the inflationary pressures and more needed to be done.”
Listing the implications for the economy in general and the manufacturing Sector in particular, MAN stated that “it is evident that the continuous and consistent increase in MPR is not yielding the desired growth in the economy..
“The Nigerian economy remains fragile and bedeviled with numerous challenges that inhibit growth. Therefore, the monetary authority needs to pay closer attention to rethink the policy mix, bearing in mind the parlous state of the economy, especially the effect of a high MPR on the manufacturing sector and the economy.
“The increase will compound the imminent recession in the manufacturing sector and negatively impact its operations in so many ways.”
They said this include increase in the cost of borrowing that will further discourage investments in the sector, high cost of production which will lead to higher commodity prices and inventory of unsold manufactured products and decline in capacity utilization owing to high interest rate and reduction in sales.
Others according to them are; reduction in the output of the sector which will further reduce the national productivity and per capita income, reduction in manufacturing employment, thereby fueling insecurity and social vices, decline in Government revenue as a result of low productivity of the manufacturing sector and the resulting low taxes among others.
The association further argued that an increase in MPR from 18% to 18.5% “will certainly lead to an increase in lending rates and worsen the uncompetitiveness of the manufacturing sector.”
The Association added that it has been clamouring for single-digit lending rates to allow manufacturers access needed funds to boost the performance of the sector.
Suggesting ways out of the guagmire, MAN noted that the cost of lending from the commercial banks “is expected to increase with the increase in MPR, it is important that priority attention should be given to improving the size of the available special funding windows and making them accessible to the industries at liberal conditionality.”
It equally called on the Federal Ministry of Finance, Budget and National Planning and the Central Bank of Nigeria to collaborate to develop an implementable, non-contradictory and well-synthesized monetary and fiscal policy that support domestic manufacturing and the productive sector in general.
MAN advocated that immediate and concrete action should be taken to address the manufacturers’ forex needs in order to support and sustain production.
“There is no doubt that prioritizing allocation of forex to the manufacturing sector to procure raw materials, machines and spare parts that are not available locally is the way to go,” MAN stated.
The manufacturers in addition appealed to Federal Government to implement strategies to encourage local raw material development and procurement, enhance infrastructure development, obviate prohibitive electricity tariffs, and increase productivity in key industries like manufacturing.
MAN said smuggling and insecurity should also be tackled by stepping up capacity building and providing sufficient security equipment and technology for monitoring and intelligence gathering.