By Merit Ibe
Following the Monetary Policy Rate (MPR), which was again increased yesterday by the Central Bank of Nigeria (CBN) to 14 per cent, the Lagos Chamber of Commerce and industry (LCCI) has urged the apex bank to maintain its targeted intervention schemes for agriculture, manufacturing/industries, energy, infrastructure, healthcare, exports, micro, small, medium and small-scale enterprises (MSMEs) and other real sectors of the economy.
The chamber noted that the Monetary Policy Committee of the Central Bank of Nigeria, at its third meeting this year raised the MPR from 13 percent to 14 percent in response to the surging inflation rate that hedged up to 18.60 percent as of June 2022.
“We note the gloomy outlook of the global economy which has a direct link to our domestic economy with pass through effects of imports. The persistent war in Ukraine and other disruptive factors may present as risks into the end of the year.
“A tightening of rates may have been a good decision by the MPC as that was necessary to tame the rising inflation rates in the past months.”
It however reiterated that the chamber’s position that rate hikes or monetary policy instruments alone will not yield the desired result of lowering inflation rate without a corresponding boost to the supply-side factors like FOREX scarcity, insecurity, rising costs of fuels and weak infrastructural support for production.
“The CBN rate hike is seen to be a necessary option considering that most other economies are raising rates for the same reason of taming inflation. A comparatively low interest rates can make our portfolio assets less attractive to asset buyers and offshore investors. Consequently, the economy could suffer from massive capital flight with a negative effect on the Naira exchange rate.
“Beyond the goal of stabilizing prices by the CBN, there are other key goals besides this; full employment, economic growth, and balance of payment equilibrium are equally important. While it is expedient to curb inflation rates, we equally risk a contracted economy that may go towards a recession.
This calls for the need to embark on targeted financing for critical sectors of the economy to help boost the supply-side.”