Manufacturers Association of Nigeria (MAN) has said that increase in the monetary policy rate by the Central Bank of Nigeria would reduce output of the sector and employment thereby fueling insecurity in the country.
The director general of MAN, Mr Segun Ajayi-Kadir who disclosed this in a statement said an increase in MPR will compound the imminent recession in the manufacturing sector and negatively impact on its operations.
He said that such a rise would not not only lead to decline in government revenue as result of low productivity of the manufacturing sector, it will as well lead to high cost of production and decline in capacity utilisation.
According to him, a hike in MPR will result in an increase in the cost of borrowing that will further discourage investment, reduction in inflow of investment and high product prices owing to rising factor costs, which will in turn render the sector less uncompetitive.
Stating MAN position on the increase, he said upward review in MPR from 18 per cent to 18.5 per cent will certainly lead to an increase in lending rates and worsen the uncompetitiveness of the manufacturing sector.
He said the interrelationship among macroeconomic variables is essential in policy formulation, as the movements of interest rate, inflation rate and exchange rate have direct impact on investment, employment and output of any economy.
He said according to the conventional monetary framework that was adopted by the CBN, increase in MPR should increase interest rate and by extension attract financial investment.
However, it will also increase the cost of borrowing, crowd out more investments in the real sector and lower the output of the manufacturing sector.” He said there is a need for the government to take pragmatic steps to quell the inflationary pressure and reposition the economy.
To sustained growth in the sector and economy in general, he said the government needs to take immediate and concrete action to address the manufacturers’ forex needs in order to support and sustain production, adding that prioritizing allocation of forex to the manufacturing
sector to procure raw materials, machines and spare parts that are not available locally is the way to go.
The government should implement strategies to encourage local raw material development and procurement, enhance infrastructure development, obviate prohibitive electricity tariffs, and increase productivity in key industries like manufacturing and tackle smuggling and insecurity by stepping up capacity building and providing sufficient security equipment and technology for monitoring and intelligence gathering.
