The Manufacturers Association of Nigeria and the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture have warned the Central Bank of Nigeria that the recent increase in base lending rate will trigger higher prices of products.
In a statement signed by its Director-General, Segun Ajayi-Kadir, MAN said the increase in the Monetary Policy Rate and the Cash Reserve Ratio portended worrisome negative consequences for the manufacturing sector.
According to the statement, in consideration of the prevailing scenario around increase in interest rate and access to funds, tougher times were ahead for the productive sector.
The group noted that the increase in MPR from 14 per cent to 15.5 per cent would rub off negatively on other rates and dash the hope for a single-digit lending rate for the productive sector of the economy.
The apex association of manufacturers also said that the recent development would lead to increased cost of borrowing by manufacturers, further beyond the double-digit rate, which would disincentivise new investments in the sector.
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Also, MAN said the rate hike would cause increased factor costs which fed into high product prices, making the sector uncompetitive.
The association also hinted that the spiral effect of the CBN’s decision to raise benchmark borrowing rate would lead to attendant job losses, thereby exacerbating the nation’s already worrisome unemployment statistics.
The statement also noted that due to higher interest rates, it would be more challenging for businesses to repay their loans, and the majority could be threatened with insolvency.