The Centre for the Promotion of Private Enterprise (CPPE) has expressed concerns about the rate hikes by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN).
Dr Muda Yusuf, CEO of CPPE said this in a statement on Tuesday in Lagos, while responding to the outcome of the MPC meeting, held Monday and Tuesday in Abuja.
He said that the rate hikes might have a negative impact on the real sector and investments, leading to increased hardship for businesses.
“We have seen yet a further tightening of monetary conditions in the economy. My prayer was for the MPC to pause the rate hikes for a number of reasons.
“First, previous rate hikes have been quite aggressive, hurting output and real sector investments. Most economic operators with credit exposures to the banks have not recovered from previous hikes.
“Interest rates were already around 30 per cent threshold. Secondly, extant CRR of 45 per cent has profound liquidity effects on the financial system. Both measures have dampening effects on financial intermediation, which is the primary role of banks in an economy.
“Thirdly, the monetary policy transmission channels are still very weak, given the level of financial inclusion in the economy. This limits the prospects of monetary policy effectiveness,” he said.
According to him, the new rate hike is an additional cross to be borne by investors who have exposures to bank credit facilities.
“Naturally, a rigid monetarist disposition by the Central Bank is expected. But we need to reckon with the costs to the economy. Hopefully, with the positive outlook for domestic refining of petroleum products, we may begin to see a moderation in energy cost and a pass through effect on general price level.
“This is one silver lining that is on the horizon at the moment. Necessary fiscal policy support are urgently needed to compensate for the adverse impact of extreme monetarism on the economy,” Yusuf said.
(NAN)
