The recent decision by the Central Bank of Nigeria (CBN) to raise the Monetary Policy Rate (MPR) from 22.75% to 24.75% has sparked concerns among private sector operators, who foresee a surge in inflation and anticipate widespread job losses across the country.
Leading industry bodies such as the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), and the Nigerian Association of Small Scale Industrialists have voiced apprehensions over the adverse impact of the MPR hike. They argue that it will exacerbate challenges in accessing affordable credit for businesses.
While acknowledging the necessity of the interest rate adjustment given the prevailing economic conditions, the Lagos Chamber of Commerce and Industry (LCCI) cautioned that it would impose additional burdens on businesses grappling with the current economic realities.
The CBN’s decision to increase the MPR to 24.75% comes amidst mounting concerns about economic hardships. CBN Governor Yemi Cardoso announced the hike following the second Monetary Policy Committee meeting for the year held in Abuja.
Explaining the rationale behind the decision, Cardoso cited the need to address current inflationary pressures and ensure exchange rate stability, with inflation already at 31.70%.
The hike in MPR follows a previous increase of 400 basis points to 22.75% during the last MPC meeting. The CBN also adjusted the Cash Reserve Requirement (CRR) to 45% from 32.5%, maintaining the Liquidity Ratio at 30%.
Cardoso emphasized the MPC’s commitment to price stability and restoring the purchasing power of Nigerians, expressing optimism that the economy would stabilize by the end of the year.
Addressing concerns about prolonged tightening measures, Cardoso assured that the current policy adjustments would be temporary and subject to relaxation once significant improvements in inflation and exchange rates are observed.
The MPC’s decision reflects a cautious approach to balance the need for inflation control with the imperative of supporting economic growth. The next MPC meeting is scheduled for May 20-21, 2024, where further deliberations on monetary policy will take place.
