LCCI reacts to CBN’s May 2023 Interest rate hike


by Omolola Dede Adeyanju

The Monetary Policy Committee (MPC) of the CBN, in its May 2023 Meeting, again hiked the benchmark interest rate by 50 basis points to 18.5% from 18.0%. It, however, retained the asymmetric corridor at +100 and -700 basis points around the policy rate. Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) remain at 32.5% and 30%, accordingly. This increase is the seventh consecutive rate hike since April 2022 and the highest level since November 2002.

The Lagos State Chamber for Commerce and Industry in a statement signed by her Director General, Dr. Chinyere Almona, FCA expressed, ‘This consistent hawkish stance by the monetary authority shows that in the last 12 months, the benchmark rate has increased from 11.5% to 18.5%. Yet, the latest figure of 22.22% showed that inflation has remained highly resistant. Inflation has grown from 16.82% in April 2022, up by 5.4 percentage points despite a 7.0 percentage point increase in the monetary policy rate, underscoring the widely acclaimed futility of rate hikes in curbing cost-pushed inflation.

‘We anticipate that borrowing costs will continue to rise. Additionally, given the drop in the first quarter GDP, high-interest rates may increase the risk to the growth of the economy. We specifically voiced our worries about how manufacturers and other businesses will endure the recently approved additional and increased excise taxes on a variety of commodities as well as the high borrowing rates.

‘While the CBN has the overarching mandate of ensuring price stability, we suggest it should do this in a manner that supports growth, especially in the face of high unemployment and rising incidence of poverty. Furthermore, monetary policy instruments alone appear quite insufficient to guarantee the desired results of low, stable, and predictable prices in the face of shocks to food and energy prices on the global scene and pass-through from exchange rate devaluation to domestic prices.’

The DG hence noted that Inflation diminishes purchasing power leading to inventory stockpiles, undermines growth, and creates economic uncertainties. She said, ‘Taming it, however, should not be at the expense of the growth and survival of the most vulnerable sectors.’