- MAN Faults CBN, Seeks Interest Rate Reduction
The Manufacturers Association of Nigeria on Wednesday faulted the decision of the Monetary Policy Committee of the Central Bank of Nigeria to retain the Monetary Policy Rate at 14 per cent.
The President, MAN, Mr. Frank Jacobs, said in a telephone interview with our correspondent that such a high interest rate was killing the manufacturing sector.
He said with the plan of the government to stimulate the economy and reposition the country on the path of growth, having an interest rate as high as 14 per cent was not favourable to the real sector.
Jacobs stated, “The CBN has been doing the same thing and we have been complaining. Fourteen per cent is obviously not favourable to the manufacturing sector or the real sector of the economy, considering that the interest rate we pay on facilities will be over 20 per cent and no country that really wants to develop industrially will encourage that level of interest rate.
“And that is why we are not happy about it. We thought that they would have done something to motivate the Deposit Money Banks to lower the interest rate, but they didn’t.”
When asked to suggest the appropriate interest rate that would stimulate the real sector, Jacobs said there was a need for the apex bank to bring the MPR down to five per cent.
He said, “As a matter of fact, we think that unless the government has another way to maybe subsidise interest rate to the manufacturing sector, that will be better; and if they can’t do that, then we feel the MPR shouldn’t be more than five per cent. Because we are hoping that the best interest rate we should be getting is five per cent to be competitive internationally.
“That has been our agitation and they keep citing economic reasons why they can’t do it; but as far as we are concerned, that is the only way we can truly diversify the economy and get revenue from non-oil exports.”
In arriving at the decision to hold the MPR at the current level, the CBN Governor, Mr. Godwin Emefiele, had said the committee considered the arguments of whether to further tighten, retain or loosen the rates.
From the standpoint of monetary tightening, the governor said the arguments in support of retaining the rate was strong and persuasive.
For instance, he said those in favour of tightening based their arguments on the conviction that the real interest rate remained negative, the upper reference band for inflation remained substantially breached and there was elevated demand pressure in the foreign exchange market.