ActionAid Nigeria has called on the Central Bank of Nigeria’s (CBN) to acknowledge the broader implications on its decision to raise the Monetary Policy Rate (MPR) to 26.25%, as announced by Governor Yemi Cardoso during the 295th Monetary Policy Committee (MPC) meeting.
ActionAid Nigeria’s Country Director, Andrew Mamedu in a press release issued by the Communications Coordinator Oluwakemi Akinremi-Segun noted that, while the decision to adjust the MPR demonstrates a proactive approach to achieving price and economic stability, it is important to acknowledge its broader implications.
He said the increased MPR will inevitably lead to higher borrowing costs for businesses and individuals. Small and Medium-sized Enterprises (SMEs), which are the backbone of our economy, will face heightened challenges in accessing affordable credit adding that this could stifle innovation, growth, and job creation within this vital sector.
According to him, for vulnerable populations, the rising cost of living and food prices, exacerbated by higher interest rates, will further strain their already limited financial resources.
He said this becomes a case of double jeopardy of high inflation and high interest rates. As the cost of borrowing increases, so does the difficulty in securing loans for essential needs, pushing many deeper into poverty.
“To mitigate the impacts of the increase in interest rates and inflation, ActionAid Nigeria proposes that the Federal and State Governments must immediately step-up social protection programs to support the most vulnerable populations.
“This includes expanding food assistance initiatives, providing targeted financial aid to low-income families, and offering more support to other social sectors, including education, health, and housing,”.
Andrew Mamedu also reiterated that it is only fair for the CBN to increase special credit facilities with lower interest rates for SMEs at this crucial time to ensure they can continue to operate and grow.
He said by providing technical and financial support to these businesses will help them sustain their contributions to the economy. Additionally, not many people understand the implications of this hike in interest rates.
He said it is very important for the CBN to collaborate with the National Orientation Agency (NOA) to engage with the public and stakeholders to explain the rationale behind these economic policies.
“This will foster understanding and patience and enhance transparent communication from the government to manage expectations and build trust and get the citizens to hold greedy businesses and individuals accountable from exploiting the system.
The country director concluded that the fiscal aspects of the economy need to complement the CBN’s efforts in managing monetary policy.
“This includes improving the ease of doing business, implementing progressive taxation, and ensuring effective budgeting and budget utilisation.
“ActionAid Nigeria remains committed to working with the government, private sector, and civil society to address these challenges and promote a more inclusive and resilient economy,” he said.
