MPC decisions detrimental to investment, economic growth – CPPE

The CBN on Tuesday raised its benchmark lending rate by 50 basis points to 27.25 per cent.

The Director of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, has expressed concerns regarding the Central Bank of Nigeria’s (CBN) recent monetary policy decisions.

He argued that these measures will exacerbate the already challenging economic landscape for manufacturers, entrepreneurs, and investors.

Mr Yusuf made this known in a statement on Tuesday.

As part of efforts to tame inflation, the CBN earlier on Tuesday raised its benchmark lending rate by 50 basis points to 27.25 per cent.

The CBN’s decision to further tighten monetary policy comes at a time when businesses are in dire need of support to stimulate growth and recovery, a sentiment echoed across the business community.

With the Monetary Policy Rate (MPR) set at 27.25 per cent and the Cash Reserve Ratio (CRR) increased to 50 per cent, Mr Yusuf said the financial conditions imposed by the CBN are becoming increasingly burdensome for businesses.

“Manufacturers and other investors need oxygen and stimulus, not policy measures that worsen an already suffocating situation,” he stated.

He emphasised that these decisions are misaligned with the prevailing mood of economic players, who are struggling to navigate a sluggish economic environment.

He cited recent data that highlights a troubling trend in Nigeria’s economic performance, with the second quarter GDP figures indicating stagnation across critical sectors.

Manufacturing along with subsectors such as cement, food and beverage, and chemicals, have shown signs of contraction, while other industries like road transport and publishing have experienced significant downturns.

Mr Yusuf pointed out that tighter financial conditions are inappropriate given these circumstances, arguing that the private sector should not bear the burden of liquidity constraints it did not create.

Addressing the issue of excess liquidity, he noted that the CBN governor rightly attributed this primarily to public sector activities.

“Stifling financial conditions to address liquidity issues is detrimental to investment and growth,” he said, warning that the implications of the latest MPC decision could push borrowing costs above 35 per cent.

The retention of the asymmetric corridor at +500 and -100 further complicates the financial landscape for businesses already grappling with high operational cost, he said.

The CPPE director cautioned that the CBN’s policies are ill-suited for the current economic climate, asserting that the increase in the CRR would impede financial intermediation, with adverse effects on both the banking system and broader economic stability.

“The operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening,” he said, noting that there is an urgent need for the CBN to reconsider its approach in light of the challenges faced by Nigerian entrepreneurs.