LAGOS, Nigeria (VOICE OF NAIJA)- The Lagos Chamber of Commerce and Industry (LCCI) has called on the Central Bank of Nigeria (CBN) to reassess its monetary policy position and refrain from further interest rate increases.
Director-General of LCCI, Dr. Chinyere Almona conveyed this message in a statement issued on Friday in Lagos.
The CBN had, on March 26, raised the Monetary Policy Rate (MPR) from 22.75 percent to 24.75 percent.
Almona recognised the CBN’s initiatives to control inflation and stabilize the exchange rate, however, she raised concerns about potential obstacles to private sector operations and economic growth.
Specifically, she emphasised the adverse effects of the rate hike on Small and Medium Enterprises (SMEs), underscoring their dependence on accessible credit for sustaining operations and facilitating growth.
She noted that numerous SMEs operated on narrow profit margins and heavily depended on affordable credit to maintain operations and foster expansion.
Almona further explained that the increase in borrowing expenses hampered their capacity to invest in initiatives that boost productivity, recruit new staff, and support economic development.
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She remarked that the recent increase in electricity tariffs significantly escalated the cost of living and conducting business in Nigeria.
Additionally, Almona highlighted the challenges posed by the importation and clearance of goods at ports, which compounded the situation. She also pointed out the complications arising from frequently fluctuating import duty exchange rates, making business planning challenging for enterprises.
She emphasised that feedback from businesses and analysts indicated that these actions would significantly burden the private sector, worsening the already difficult economic conditions.
Almona highlighted that the private sector, being the main driver of growth and employment in Nigeria, currently faces heightened borrowing expenses, diminished investment incentives, and various other challenges.
“The recent hikes in the MPR have directly translated into higher interest rates, making it more expensive for businesses to access credit for working capital, expansion, and sustainability.
“We have consistently advised that rate hikes alone will not curb inflation without resolving challenges of the real sector of the economy.
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“The real sector has demonstrated the capacity to create more jobs, manufacture products for consumption and export, and sustain the industrial base of the economy.
“While we understand that high-interest rates attract Foreign Portfolio Investments and local investors to treasury bills and bonds, we lament the drying up of funds away from the private sector to government treasuries,” she said.
Almona acknowledged that removing electricity subsidies might attract foreign investors with cost-reflective tariffs.
However, she expressed concern about businesses paying high fees for inadequate services. She noted that despite higher costs, companies still struggled to access reliable power.
The director urged for a robust metering initiative to ensure 100% coverage of electricity consumers.
She also emphasised the importance of establishing a strong regulatory and policy framework to attract increased foreign investment into the power sector, in addition to infrastructure development.
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“It is, therefore, expected that with government having access to more funds, the huge costs borne by companies in providing business support infrastructure like power, logistics, warehousing, security, and others should be promptly provided with saved funds from discontinued subsidies and taxes.
She recommended that the CBN explored alternative policy measures that promoted credit access, stimulate investment, and support entrepreneurship.
(NAN)