The Manufacturers Association of Nigeria, MAN hopes that the Central Bank of Nigeria, CBN, will creatively go beyond the conventional monetary management system, because global economic dynamics are changing, and conventional measures may no longer be effective.
The Director General, MAN, Segun Ajayi-Kadir stated this while reacting to the recent increase of the interest rate by the Monetary Policy Committee, MPC, of the CBN.
In the light of the above, MAN recommends the following measures listed to include: upscaling the current efforts at improving the availability of development-oriented funds at single digit interest rate, prioritizing industries, promoting a more robust production centric forex management and intervention in official forex market, leveraging on sustained increase in crude oil price in the global market and giving priority attention to meeting forex requirement of the industries vital inputs that are not available locally, to sustain and ramp-up production.
Others are promoting monetary and fiscal policy fusion; that is, the Central Bank of Nigerian and the Federal Ministry of Finance, Budget & National Planning should jointly put complimentary measures in place in support of domestic manufacturing and emplacing the framework that will facilitate harmonious implementation of relevant policy guidelines aimed at boosting productivity.
Undoubtedly, MAN believes strongly that the Implementation of these measures will enable industries to remain in business; increase aggregate output; improve contribution to GDP and ensure inclusive and sustainable economic growth.
Speaking further, he maintained that it is important that the monetary authority strategically set in motion mechanism for wholistic balancing of the real interest rate, which is critical to investment and not just following leading economies to adjust Interest rate without considering domestic peculiarities. Interest rate, MPR, Inflation and Exchange Rate are triadically critical to investment and production. Balancing the rates in line with local aspiration is therefore imperative.
The DG noted regrettably that at the moment, other contributory factors like insecurity and externalities induced food shortage; Government’s excessive drive for internally generated revenue, increase in interest rate in the US; unsustainable and unpragmatic interventions in the forex market; the acute shortage of forex and unfriendly exchange rates are not only fueling inflation, but seriously depressing industrial production.
“In consideration of the prevailing scenario around increase in interest rate and access to funds, tougher times are ahead for the productive sector. Clearly, the increase in MPR from 14% to 15.5% will rub-off negatively on other rates and dash the hope for a single digit lending rate for the productive sector in the economy. Moreover, the observed continuous contractionary monetary policy posture without complimentary fiscal support may not effectively reduce the prevailing inflationary pressure on the economy”, he stressed.
“This is not unconnected with the fact that the current increase in Consumer Price index as reported by NBS is not largely driven by monetary phenomenon, as self-inflicted weak foreign exchange rate management can be linked to the pressure”, added the DG.
“An experiential x-ray of the prevailing economic stance revealed that domestic output gap due to the inefficiency of the macroeconomy, unguided industry development, inclement and high-cost operating environment, exploitative regulatory ecosystem and some externalities are predominantly responsible for the rising inflation that the nation is experiencing”, he revealed.