By Merit Ibe

Next the increase in the monetary policy rate (MPR), the The Lagos Chamber of Commerce and Industry (LCCI) has urged the Central Bank of Nigeria (CBN) to expand its targeted intervention programs to support the productive sectors of the economy to reduce production costs.

The General director, Dr. Chinyere Almona, who made the statement recently, noted that beyond the role of price stability, the CBN must ensure to support economic growth that can create jobs and increase government revenue.

“Once again, we reaffirm that rate hikes alone will not be enough to combat the near runaway inflation trend in Nigeria. We need interventions to boost the supply of goods and services, build essential support infrastructure and resolve the illiquidity crisis in the foreign exchange market.

Noting that the increase aimed to control the rise in the inflation rate which was feared to soon take on a runaway trend, Almona explained that the CBN has always maintained that the high rate of inflation was due to non-monetary factors which were beyond his competence.

“We have consistently pointed to the factors responsible for rising inflation, including an epileptic supply from Premium Motor Spirit (PMS), the high cost of automotive diesel (AGO/Diesel), increases in electricity tariffs , insecurity and illiquidity crisis in the foreign exchange market. .

These factors continued to put pressure on production costs, resulting in higher prices or cost inflation. These headwinds must be fought head-on so that inflationary pressure is durably tamed.

“Rising interest rates will normally mean less credit to the private sector and this can result in reduced investment and limited output in the economy, at least in the short term.

“This action also has implications for economic growth, job creation and revenue generation for the government. When the MPR was 11.5%, some lenders charged up to 25% maximum rate for small businesses. With the benchmark interest rate at 13%, we could probably see rates climb beyond 30% for SMEs.

While we agree with the proposition that a lower interest rate in Nigeria relative to higher rates in developed economies would lead to capital flight, we must reaffirm our recommendation that interest rate hikes in interest will not dampen inflationary pressures.

“Supply-side challenges such as insecurity, currency scarcity and uncertainties related to the inconsistent political environment must be addressed to curb rising inflation. This is a more sustainable solution to the rising inflation in Nigeria.