MPR: MAN wants CBN to refrain from policies that hamper performance of real sector

COMFORT EKELEME

The Manufactures Association of Nigeria (MAN) has urged the Monetary Policy Committee of the Central Bank of Nigeria (CBN) to address the identified root causes of inflation and refrain from intensifying policy choices that hamper the performance of the real sectors of the economy.

Director General of MAN, Segun Ajayi-Kadir in a statement titled “The Implication of the Decision of the Monetary Policy Committee of the CBN on the Manufacturing Sector’ said the increase in Monetary Policy Rate (MPR) from 18per cent to 18.5per cent will certainly lead to an increase in lending rates and worsen the competitiveness of the manufacturing sector.

He said, the Association has been clamoring for single-digit lending rates to allow manufacturers access needed funds to boost the performance of the sector.

According him, this increase, like the previous ones, is evidence that the CBN is either unperturbed about the plight of the productive sector or is unable to fathom out a more creative policy mix that would reflate the sector.

“We are persuaded that monetary authority is oblivious of the fact that the failure of its  tightening policy to address the inflationary pressure is because the hike in inflation is largely caused by a combination of familiar challenges, including low output which is attributed to instability of macroeconomic variables, inconsistent and lackluster fiscal policy regime, incoherent industrial policies, challenging and expensive operating environment, exploitative regulation, external shocks and poor exchange rate management.

“The interrelationship among macroeconomic variables is essential in policy formulation, as the movements of interest rate, inflation rate and exchange rate have direct impact on investment, employment and output of any economy.

“According to the conventional monetary framework that was adopted by the CBN, increase in MPR should increase interest rate and by extension attract financial investment. However, it will also increase the cost of borrowing, crowd out more investments in the real sector and lower the output of the manufacturing sector.

“Therefore, it is necessary for government to think outside the conventional monetary policy framework and take pragmatic steps to quell the inflationary pressure and reposition the economy,”.

Speaking further, Ajayi-Kadir stated that as 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.

To him, the Federal Ministry of Finance, Budget and National Planning and the Central Bank of Nigeria should collaborate to develop an implementable, non-contradictory and well-synthesized monetary and fiscal policy that support domestic manufacturing and the productive sector in general.

“By doing this, the supply of goods and local production will increase relative to current demand thereby improving aggregate output.

“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.

“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.

“Tackle smuggling and insecurity by stepping up capacity building and providing sufficient security equipment and technology for monitoring and intelligence gathering,” he added.

The MAN DG, however, maintained that the Association has been clamoring for single-digit lending rates to allow manufacturers access needed funds to boost the performance of the sector.

He added that the interrelationship among macroeconomic variables is essential in policy formulation, as the movements of interest rate, inflation rate and exchange rate have direct impact on investment, employment and output of any economy.

Also, he noted 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,” he said.

He further urged the regulatory authorities 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.

The MAN DG further said that there is need to tackle smuggling and insecurity by stepping up capacity building and providing sufficient security equipment and technology for monitoring and intelligence gathering.

The Monetary Policy Committee of the CBN raised the MPR to 18.5 per cent in May 2023 from 18 per cent that was fixed at the 290th meeting of the committee held in March, 2023.

The rate was raised by 50 basis points, while the Cash Reserve Ratio (CRR) and the Liquidity Ratio (LR) were maintained at 32.5per cent and 30per cent respectively.

According to Mr. Godwin Emefiele, the Governor of Central Bank, 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 (NBS) in April 2023.

This MPR increase is the 7th in a trend and the inflation rate continues to rise despite the increases. This is a clear indication that the policy tightening is not effective in curbing the inflationary pressures and more needed to be done.