MPR: LCCI says high lending rates will hurt SMEs, hamper credit access

The Lagos Chamber of Commerce and Industry (LCCI) has advised monetary and fiscal authorities to focus on factors driving inflation rates by tackling supply-side deficiencies rather than demand-side management.
Chinyere Almona, LCCI director-general, gave the advice on Wednesday in Lagos in reaction to the Central Bank of Nigeria’s decision to increase the Monetary Policy Rate to 22.75 per cent.
At its first meeting of the year, the Monetary Policy Committee of the CBN voted to raise the MPR by 400 basic points from 18.75 per cent.
There was also an increase in the asymmetric corridor to +100bps/-700bps (Previously: +100bps/-300bps), in cash reserve ratio (CRR) to 45 per cent (Previously: 32.5 per cent), while the liquidity rate was retained at 30 per cent.
Mr Almona advised the CBN to follow its Foreign exchange market reforms to a conclusive end, as the high exchange rate against the naira was a major culprit in the skyrocketing inflation rates.
On the fiscal side, she stated that the government needed to subsidise some productive sectors like agriculture, transport, and healthcare while keeping a stern eye on enhancing the country’s security profile.
The LCCI boss noted that other areas of intervention could be adopting a cheaper duty rate for importing agricultural inputs for local manufacturing and investment in building agro-industrial hubs across the country.
“The LCCI acknowledges the recent decision of the CBN to raise the benchmark lending rate by 400 basis points to 22.75 per cent, in what has been described as an aggressive regulatory intervention.
“The move comes at a crucial time when the Nigerian economy is facing challenges such as elevated inflation, commodity price hikes, foreign exchange crisis, and rising cost of production.
“While the CBN intends to control inflation, the LCCI notes that the decision, particularly the fifth consecutive hike, raises concerns about its effectiveness in tackling the rising food inflation and the likely impact on businesses and economic growth.
“Curbing the current rising inflation clearly requires an effective combination of both fiscal and monetary policies to achieve a meaningful result,” she said.
Mr Almona also advised the government to continue making credit available to micro, small and medium enterprises (MSME) to support their operations and production lines.
She advocated that the concessionary rates lower than the CBN prevailing MPR should be considered for MSMEs.
“The high lending rates make it challenging for businesses to access credit, especially for SMEs that are the backbone of the economy. The increase in production costs could lead to higher prices for goods and services, potentially affecting the competitiveness of Nigerian products in Africa and global markets, respectively.
“As the voice of the business community, the LCCI remains committed to engaging with policymakers to ensure a conducive business environment that fosters growth, investment, and sustainability,” she said.
(NAN)
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