…Says manufacturing companies operating below 30%
The Manufacturers Association of Nigeria (MAN) has expressed concerns over the Central Bank of Nigeria (CBN) decision to increase the Monetary Policy Rate (MPR) from 26.75% to 27.25 percent.
In an issued statement on Friday, the association said the decision has far-reaching implications for the manufacturing sector in Nigeria.
MAN’s Director General, Segun Ajayi-Kadir, explained in the statement that the continued increase in interest rates, which now totals 15.75 percentage points since May 2022, would compound the challenges faced by the sector, including rising production costs in the face of declining consumer purchasing power.
“With the increase in borrowing costs, manufacturers will now pay over 35 percent on their credit facilities. Clearly, this will lead to an increase in production costs higher prices of finished goods, lower competitiveness and production capacity expansion”, he stated.
He noted that the impact of higher interest rates goes beyond compounding the challenges of manufacturers as it stifles opportunities for investment in crucial areas such as technology, retooling and expansion within the manufacturing sector. According to him, manufacturers will all the more be compelled to choose servicing existing credit facilities over expansion and investment in new product lines.
He further explained that this growing stockpile of unsold products underscores the difficulties manufacturers face in a weakening market.
The association said it was surprised that the CBN is increasing the MPR against the backdrop of the meagre improvement in inflation figures, which could be largely traceable to the onset of the harvest season.
In light of the recent decisions by the MPC, MAN urged the Government and CBN to consider conducting a comprehensive review of the effects of continuous rate hikes on inflation and the real sector over the past five years to guide future decisions.
It also urged them to focus on promoting domestic production and economic recovery by allowing time for previous rate increases to take effect before implementing further hikes and strengthen the collaboration between the monetary and fiscal authorities to ensure that they are aligned to support growth.
