By Yinka Kolawole

The Manufacturers Association of Nigeria (MAN) has faulted the increase in the monetary policy rate ((MPR) by the Central Bank of Nigeria (CBN), saying it portends tougher times for the already beleaguered manufacturing sector in the country.

Recall that the monetary policy committee (MPC) of CBN had on Tuesday announced its decision to raise the MPR by 150 basis points from 14 per cent to 15.5 per cent, presumably to curb inflation.

In a statement made available to Vanguard on Friday, Director General, MAN, Segun Ajayi-Kadir, stated: “In consideration of the prevailing scenario around increase in the interest rate and access to funds, tougher times are ahead for the productive sector.

“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.”

According to him, an increase in the two monetary parameters, MPR and CRR portend worrisome negative consequences for the manufacturing sector.

He listed some of the implications on the manufacturing sector to include: “Increased cost of borrowing by manufacturers, further beyond the extant double-digit rate, which disincentivizes new investments in the sector; Increased factor costs which feed into high product prices, making the sector uncompetitive; High product prices, which makes patronage to plummet and lead to a huge inventory of unsold manufactured products in the sector; and High inventory of manufactured products will trigger reverse effect in the sector as manufacturing capacity utilization, production, employment, profit and tax contribution to the national building will decline.”

On the way forward, the MAN DG further said: “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.”

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