Following the Monetary Rate hike by the CBN in earlier in January, the Lagos Chamber of Commerce (LCCI) has urged the Nation’s APEX Bank to look further inward at the peculiar situations driving inflationary pressures within the Nigerian economy as rate hikes are known to weaken growth.
In a Press Statement released to the Media, the LCCI Boss Dr. Chinyere Almona, FCA urged the monetary and fiscal authorities to intervene with policies and instruments that are growth-boosting.
”We are also calling on the government to commence preventive measures against the expectation of flooding in 2023.
The Central Bank of Nigeria (CBN), through its Monetary Policy Committee (MPC) on the 23rd and 24th of January 2023, resolved, among other issues, to increase MPR to 17.5% from 16.5%, retain the asymmetric corridor of +100/-700 basis points around the MPR, retained the CRR at 32.5% and retain liquidity ratio at 30.0%.
”The decision to further hike interest rates is to curb inflation which has remained above 21%. Drawing close to a general election and with the factors driving food inflation still largely unresolved, we agree with the monetary authorities that the time for easing the rates may not have come at this time.”
According to the DG, new initiatives such as the redesigning of the Naira notes, launching of Nigeria’s first National Domestic Card Scheme aimed at deepening the cashless economy, and the withdrawal limits are bound to impact on spending, which in turn may affect business and the adjustments in the economy.
”We can predict that there will be some easing of the inflation rate in this first quarter. We note the easing of the acceleration of inflation rates globally and equally the easing of monetary rates in some economies, but these are economies that have been able to tame their food inflation and its influence on headline inflation. In Nigeria, we need to tackle food inflation from the roots looking at issues like targeted support to the agriculture sector, manufacturing and the provision of more export infrastructure for businesses to export more and earn more foreign exchange.”
She also explained that the increase in the policy rate will put pressure on businesses with the resultant effect of rising operating costs which could lead to workers’ layoffs and low productivity.
”This was our major concern regarding the implementation of more taxes, as provided in the 2022 Finance Bill. We urge the government to consider streamlining these issues such that they do not swamp businesses and render them unproductive and uncompetitive.”
She also advised that policymakers consider more actions to increase and stabilize oil production levels to earn more FOREX.
”Better coordination of fiscal policies can complement the deployment of monetary instruments by the CBN. Businesses should also look inwards to source their raw materials instead of waiting for the CBN to allocate FOREX to them. We have consistently advocated for a more friendly policy/business environment that will attract foreign and domestic investment and improve productivity (particularly domestic food production). While we commend recent strides in dealing with insecurity, we ask for more deployment of technology and surveillance apparatus, particularly as we approach the general elections in weeks. Weak power supply, scarcity of FOREX, and expensive logistics due to fuel scarcity are critical issues that must be closely watched and attended to with effective policies and fiscal instruments.
