NACCIMA Hails CBN’s Resolve to Fight Inflation, Expresses Concern about High Cost of Fund

NACCIMA stated, “The decision of the MPC of the CBN to raise the Monetary Policy Rate (MPR) from 14 per cent to 15.5 per cent is the third move by the central bank in 2022 in response to the continuous increase in inflation rate. Indeed, this approval reflects the resolve of the MPC of the CBN to stem the rising rate of inflation. Nonetheless, this should have been accomplished in close cooperation with the OPS.”

The association noted that the increase in interest rates was merely a strategy to manage the escalating inflation rate, which might not be sufficient to reduce inflation. It highlighted the need to address its underlying causes.

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The association stated that the government must ensure monetary stability, continuous electricity supply and security to promote inclusive economic growth in order to reduce inflation.

NACCIMA added, “While we suspected that the government believed that the country’s inflation could be controlled by a one-directional review, we, as the organised private sector, feel that the country’s pressing inflationary condition is the result of multiple factors.
“And that relying just on monetary policy to restrain its unabated growth may be ineffective, as opposed to producing the desired outcome.
“The ramifications of the increase in the interest rate would negate the proliferation of ease of doing business, the impact of which most businesses are still uncertain about.”

It stated, “The monetary policy of raising interest rates is unidirectional and would negatively affect both businesses and individuals. It is never the best policy to contemplate in the current economic situation, as it is evident that there are other causes of the stunning levels of inflation.
“The encouraging approach to reduce the current rate of inflation is to conduct a comprehensive analysis of all the causes contributing to the inflation’s rising trend and to implement control measures that can halt their effects.”

The NACCIMA added, “Following this policy, the majority of Small and Medium Enterprises (SMEs) would begin to have less discretionary income because of increased interest payments, reducing their capacity to invest, reinvest, and hire additional personnel.

“Due to higher interest rates, it would be more challenging for businesses to repay their loans, and the majority could be threatened with insolvency.
“Consequently, the survival of small and medium-sized businesses is threatened by the rising costs of capital and production, which result in an increase in the price of finished items. This new regulation will cause increased hardship for businesses and individuals.”

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