The Centre for the Promotion of Private Enterprise (CPPE) has strongly criticised the Central Bank of Nigeria’s (CBN) latest decision to raise interest rates.
The organisation argued that the hike is detrimental to investment and economic growth, especially at a time when businesses are already struggling.
In a statement released on Tuesday, Muda Yusuf, the chief executive officer of CPPE, expressed concern over the impact of the increased monetary policy rate (MPR) on the economy.
“The economy needs oxygen and stimulus, not policy measures that would worsen an already suffocating situation,” he said.
The CBN’s monetary policy committee (MPC) raised the MPR from 26.75 percent to 27.25 percent during its 297th meeting in Abuja.
The decision was announced by CBN Governor Olayemi Cardoso, who also increased the cash reserve ratio (CRR) from 45 percent to 50 percent.
Yusuf argued that these monetary conditions are extremely difficult for businesses to bear, given the prevailing macroeconomic challenges.
“It is quite troubling that at a time when manufacturers, entrepreneurs, and other investors in the economy are craving for a breath of fresh air, the CBN chose to tighten the noose on them by resorting to a further tightening of monetary policy,” he said.
The CPPE director emphasized that the private sector should not be penalized for the actions of the public sector.
“The private sector should not be made to pay the price of liquidity growth which they were not responsible for,” he said.”Issues of excess liquidity should be addressed within a causative context.
The injection of liquidity into the system is largely public sector-driven, as rightly noted by the CBN governor. Therefore, the focus of resolving it should be within that context.”
Yusuf warned that the increase in CRR to 50 percent would have negative consequences for the banking system and the economy.
He argued that it would further exacerbate the cost of funds for investors, potentially pushing it above 35 percent.
This, combined with the increased MPR, would make it even more challenging for businesses to access financing.
“We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country,” Yusuf said.
“The operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening.”
Boluwatife Enome
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