The Manufacturers Association of Nigeria (MAN) has criticised the recent interest rate increase by the Central Bank of Nigeria (CBN).
The Director General of MAN, Mr. Segun Ajayi-Kadir, made the association’s position known on Thursday in a statement titled ‘Reaction of MAN on the Report of MPC Meeting on September 23-24, 2024’.
Investors King reported that on September 24, 2024, the apex bank announced another increase in its Monetary Policy Rate (MPR) to 27.25% from 26.75 percent.
The decision was made during the Monetary Policy Committee (MPC) meeting chaired by CBN Governor, Yemi Cardoso.
Reacting to the development, MAN noted that with the higher interest rate, the cost of production will increase.
According to him, the impact of the increase goes beyond the manufacturers, it will stifle investment opportunities.
“With the increase in borrowing costs, manufacturers will now pay over 35 percent on their credit facilities. Clearly, this will lead to increase in production costs, higher prices of finished goods, lower competitiveness and production capacity expansion.
“The impact of higher interest rates goes beyond compounding the challenges of manufacturers; it stifles opportunities for investment in crucial areas such as technology, retooling, and expansion within the manufacturing sector.
“Manufacturers will, all the more, be compelled to choose servicing existing credit facilities over expansion and investment in new product lines.
“For instance, over the first six months of the year, manufacturers incurred more than N730 billion in capital expenses due to the continuous rise in interest rates imposed by commercial banks.
“This dilemma hampers innovation, productivity and growth,” Ajayi-Kadir added.
Furthermore, the Director General of MAN revealed that the recent increase will impact the Nigerian economy.
He noted that the country’s capacity to employ its growing youth population diminished significantly.
“This growing stockpile of unsold products underscores the difficulties manufacturers face in a weakening market. The broader implications of these challenges threaten not only the manufacturing sector but also the Nigerian economy as a whole.
“As higher borrowing costs lead to poor access to funds, lower capacities and potential business closures. Truth be told, the capacity to absorb the country’s growing youth population into meaningful employment has diminished significantly with the attendant adverse socioeconomic and security implications.
“We also note that this increase is coming at a time that central banks in other climes are either retaining or cutting rates.
“It is, therefore, expedient that government adopt a holistic and balanced approach to policy formulation and decisions, with due consideration of their overall impact on the various sectors of the economy, particularly the productive sector.
“Undoubtedly, price stability is crucial, and so is the survival and growth of the manufacturing sector. This should be top priority at this time and is in line with the government avowed commitment to growing domestic production, creating more jobs and alleviating poverty,” Ajayi-Kadir added.
