The Manufacturers Association of Nigeria (MAN) is worried that the recently upward review of prime lending rate by Nigeria’s Monetary Policy Committee (MPC) would further aggravate the difficulties manufacturers are encountering in accessing loanable funds.
In a recent statement signed by the Director General, Segun Ajayi-Kadir, MAN noted that the new 13% MPR, which is a far cry from the anticipated single digit rate, is not manufacturing friendly considering the myriad of binding constraints already limiting the performance of the sector.
The Nigerian manufacturers’ umbrella body urged the Central Bank of Nigeria (CBN) to relax the stringent conditionality for accessing available development funding windows to improve the flow of long-term loans to the sector at single digit interest rate.
The statement read in part, “The new MPR is another level of increase in interest rates on loanable funds, which will no doubt upscale the intensity of the crowding out effect on the private sector businesses as firms have lesser access to funds in the credit market.
“It will spur upward review of existing lending rates dependent obligations of manufacturing concerns, which will drive costs northward and intensify demand crunch emanating from the heavily eroded disposable income of Nigerians, constrained access of households and individuals to cheap funds.
“It will raise cost of manufacturing inputs, which will naturally translate to higher prices of goods, low sales and enormous volume of inventory of unsold products as well as exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses and heighten the mortality rate of small businesses.
“This will further reduce capacity utilization, upscale the rate of unemployment, incidences of crime and insecurity as the capacity of banks to support production and economic growth is heavily constrained while the pace of full recovery of the real sector will be reduced, making manufacturing performance to remain lackluster and contribution to the GDP leaner.
“The expectation is that MPC will ensure that future adjustments of MPR takes into consideration the trend of core inflation rather than basing decision on headline and food inflation. This will no doubt shield the sector of the backlashes from the 13.5% MPR, ramp up production and guarantee sustained growth in the overall best interest of the economy.”
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