NACCIMA warns of economic fallout amid CBN rate increase

The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has raised apprehensions regarding the Central Bank of Nigeria’s decision to increase the Monetary Policy Rate (MPR) to 24.75 percent.

The association, represented by its president, Dele Oye, expressed concerns about the potential adverse effects on Nigeria’s private sector.

In a statement released on Tuesday, Oye highlighted the significant repercussions expected from the hike in both the MPR and Cash Reserve Ratio (CRR), which was raised to 45 percent.

He emphasised that these measures could significantly hamper the operations of private businesses across the country.

NACCIMA had previously communicated its reservations to the CBN governor on March 13, 2024, when the MPR was initially raised to 22.75 percent. Oye reiterated the association’s stance, lamenting the lack of involvement of the private sector in the decision-making process of the apex bank.

He said the recent rate hikes, while aimed at controlling inflation, are likely to have the following negative consequences including an increase in the Cost of Borrowing as existing loans will incur higher interest rates, raising the cost of capital for businesses.

“This scenario discourages entrepreneurial activities and expansion plans, which are vital for economic growth and job creation.” he said

Restricted Credit Availability, according to him, with the increase in the CRR, banks’ ability to lend is further curtailed and will exacerbate the challenges faced by the private sector, which is already grappling with limited access to finance.

Expressing concerns over the potential repercussions, Dele Oye emphasised the inevitable pass-through effects on inflation, asserting that businesses, burdened by heightened interest costs, would inevitably transfer these expenses to consumers, thereby fueling inflation rather than alleviating it.

Moreover, he underscored the detrimental impact of tightened monetary conditions on economic growth, warning that such measures could curtail investment and consumption, pivotal drivers of economic expansion. Oye cautioned that this could impede the ongoing economic recovery efforts and dim prospects for prosperity.