The hike in Nigeria’s Monetary Policy Rate, also known as interest rate, from 22.75 per cent to 24.75 per cent by the Central Bank of Nigeria will further accelerate the country’s inflation and lead to massive job cuts across the country, private sector operators stated on Tuesday.

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, and the Nigerian Association of Small Scale Industrialists explained that the increase in MPR would worsen he private sector’s ability to access affordable credit.

While they described the interest rate hike as a move that would come with unintended negative consequences, the Lagos Chamber of Commerce and Industry said the MPR hike was a price that businesses would have to pay, given the current state of the economy.

The CBN again increased the MPR to 24.75 per cent from 22.75 per cent despite concerns about economic hardship.

The CBN Governor, Yemi Cardoso, announced this after the second Monetary Policy Committee meeting for the year in Abuja on Tuesday.

He said the new rate was focused on reducing current inflationary pressures and ensuring sustained exchange rate stability.

“All 12 members of the committee decided to further tighten monetary policy by raising the MPR by 200 basis points to 24.75 per cent from 22.75 per cent. Adjust the asymmetric corridor around the MPR to +100 to -300 from plus 100 to -700 basis points,” he noted.


With inflation at 31.70 per cent, Cardoso declared that the new MPR was part of moves to tackle the country’s inflation.

The bank had, during its previous meeting, raised the MPR significantly by 400 basis points to 22.75 per cent from 18.75 per cent.

It also made changes to the asymmetric corridor around the MPR, setting it at +100/-700 basis points from +100/-300 basis points

The CBN increased the Cash Reserve Requirement to 45 per cent from 32.5 per cent, and maintained the Liquidity Ratio at 30 per cent.

Although the apex bank said it took the decision to fight inflation, the benchmark interest rate had been 22.75 per cent since the last MPC meeting that was held on February 26 and 27, 2024.

Briefing journalists on Tuesday, Cardoso, who chaired the MPC, also stated that the Cash Reserve Ratio of Deposit Money Banks was retained at 45 per cent, while the CRR of merchant banks was reviewed upward from 10 per cent to 14 per cent.

He disclosed that the liquidity ratio was left unchanged at 30 per cent.


Cardoso said the MPC noted the increase in food inflation from 35.41 per cent to 37.9 per cent as part of the consideration of the committee for revealing the interest rate.

“From our perspective, the key thing is to be fully focused on our core mandate to fight inflation and stablise the economy. The purchasing power of the average person should be restored to the level it should be,” he said.

The apex bank’s governor added that the economy would be stabilised by the end of the year.

“Things should moderate from May and the inflation rate should come down by the end of the year,” he stated.

Justifying the reasons for the hike, the former Lagos State Commissioner for Finance explained that the MPC was faced with the option of either progressing with its tightening cycle or holding to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement.

He added that the MPC’s decision to tighten the economy was based on economic data and market analysis to fulfil its price stability mandate.

“With respect to growth, yes, there appears to be a trade-off of some sort. We expect the tightening to be short term, not long term. The right response to the policy will influence MPC’s decision to take growth into consideration


“Consequently, at this meeting, the MPC was faced with the option of either progressing with its tightening cycle or hold, to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement. After reviewing the balance of risks and the near-term inflation outlook, members were convinced of the need to progress with the tightening cycle,” he stated.

Cardoso, allaying fears of a continuous rate hike, assured that the current spate of monetary policy tightening measures by the CBN would not be long drawn and would be relaxed once there were substantial improvements in the economy in terms of inflation and exchange rate.

According to the CBN governor, the committee does not expect a long-drawn interest rate tightening and as the reforms being implemented take effect, there will be relaxation in MPR.

He said, “While the increase in interest rate may have tendencies toward strangulating the economy, with the foreign exchange rate coming down, that also helps to moderate it overall.

“And as I said earlier, you would expect that this would not be too long drawn; at least I would hope so. We are getting towards a situation where the exchange rate is moderating, and we are expecting it to moderate and then it finds a level that, quite frankly, is sustainable. This would involve huge collaboration with the fiscal side because a lot of that cannot just rely on the monetary side alone.”

The CBN boss stated that the considerations of the committee at the meeting focused on the current inflationary pressures and the need to anchor inflation expectations as well as ensure sustained exchange rate stability.

“These considerations underscore the importance of the CBN’s commitment to the price stability mandate and the need to urgently bring inflation under control to ensure that the purchasing power of ordinary Nigerians is restored in the short to medium term,” he said.

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The apex bank governor mentioned that members of the MPC noted the continued rise in headline inflation, driven largely by food prices because of supply shortages and the high cost of logistics and distribution.

He added that they called for immediate action against insecurity in the country while commending the government for its resolve to address the increasing hunger level in Nigeria.

“The committee, therefore, was of the view that addressing food insecurity is key to containing current inflationary pressures. On this note, members commended the ongoing efforts of the Federal Government towards addressing food insecurity.

“Some of these measures include the provision of various palliatives, the release of grains from the strategic reserves, the distribution of seeds and fertilisers, as well as farm implements for dry season farming.

“The committee, therefore, called for the full implementation of the Federal Government’s agricultural policies and programmes to improve food supply and further advised for broader fiscal consolidation, particularly in the improvement of tax collection and tax-to-GDP ratio.

“The committee noted with satisfaction the level of stability achieved in the foreign exchange market in the last few weeks. This, in the view of members, reflects the impact of the bank’s recent policy actions and reforms, as well as increased transparency in the market.”

According to Cardoso, the committee noted the efforts of the bank in offsetting verified foreign currency obligations, an action that will greatly enhance investor confidence and attract foreign investments to Nigeria.


The MPC also reviewed developments in the banking system and noted that the industry remained safe, sound and stable.

The committee, thus, called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macroprudential guidelines.

It also enjoined the bank to expedite action on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.

Cardoso noted that the key drivers of inflationary pressures remained the strong exchange rate pass-through to domestic prices; rising cost of transportation; high cost of energy and other production inputs; lingering insecurity, especially in food-producing areas; and legacy infrastructure deficits.

Data from the National Bureau of Statistics showed that real GDP grew by 3.46 per cent in the fourth quarter of 2023, compared with 2.54 per cent in the previous quarter.

The apex bank governor hinted that disruptions to the global supply chain, associated with pockets of geopolitical tensions, continued to pose a key concern to monetary policy.

“Global inflation has, however, continued to decelerate in 2024 but is expected to remain above the long-run objectives of major central banks. The interest rates of advanced economy central banks are, thus, expected to remain high in the short to medium term before commencing a descent.


“Consequently, global financial conditions may remain tight through 2024. Accordingly, the committee will continue to monitor developments in the global and domestic economies to ensure that inflationary expectations are anchored to restore and sustain macroeconomic stability,” Cardoso said.

The CBN stated that the next MPC meeting would be held on May 20-21, 2024.

NACCIMA raises concern

The National President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Dele Oye, said the group was deeply concerned with the manner in which the apex bank had continued to raise interest rates.


“The NACCIMA, representing the collective voice of Nigerian businesses across commercial, industrial, and agricultural sectors, is deeply concerned by the central bank’s approach to curbing inflation and managing excess liquidity through broad-based policy tools that inadvertently impose constraints on the private sector’s ability to access affordable credit.

“Our position, as detailed in our previous communication (Ref: NACC/NP22/23/1249 dated March 13, 2024), remains that the focus of the CBN’s policies should be recalibrated towards addressing the excess liquidity primarily stemming from the public sector’s borrowing habits and expenditure.

“The private sector, which has been effectively sidelined in the bank lending market due to the crowding-out effect, now faces even more severe repercussions,” he stated.


Oye noted that the recent rate hikes, while aimed at controlling inflation, were likely to have many negative consequences.

He outlined them to include an increase in the cost of borrowing, adding that “existing loans will incur higher interest rates, raising the cost of capital for businesses. This scenario discourages entrepreneurial activities and expansion plans, which are vital for economic growth and job creation”.


https://punchng.com/24-5-interest-rate-private-sector-foresees-higher-inflation-massive-job-cuts/

This country needs job opportunity, not job cut in this trying period

The nonsense capitalists system will always bring recession in every decade

The capitalists make profits by increasing the price of their good and services while underpaying the workers. The same workers are the consumers of their products, when the consumers are unable to afford the price, lay off follow and then recession.

This is the main reason why the price of things in Nigeria never comes down when it goes up despite the drop in exchange rate. We are gradually becoming a socialist economy

When i saw the manner at which ebbinpawa energizer kids were jumping up at this news yesterday, i was shocked.

I have come to understand that the average agbado personnel is highly bereft of simple knowlegdge on crucial matters.
Majority of them are just empty headed hungry people on the streets picked up and given uniform to rant rubbish.

Just like the way they jumped up and clapped without knowing the effects when tinubu without any plan remove subsidy.
Only for them to end up crying and wailing.

.

Wailers, keep quiet. The job of CBN is to stabilize the naira.

Putindbutt:
Wailers, keep quiet. The job of CBN is to stabilize the naira.

The naira needs more than artificially valued injections of forex. It needs local production. In few weeks time we will see who is talking when not suppose to.