The Manufacturers Association of Nigeria (MAN) has decried the latest hike in the Monetary Policy Rate (MPR) to 27.25 per cent from 26.75 per cent.
The association stated that the increase would compound the challenges faced by the sector, which included rising production costs in the face of declining consumer purchasing power.
Director General of MAN, Segun Ajayi-Kadir, said yesterday in public statement titled “Reaction of MAN on the Report of MPC Meeting on September 23-24, 2024” that MAN is worried about the implications of the continuous rate hikes on the productive sector and earnestly expects the CBN to stop the rate hike and explore more of the monetary-fiscal policy handshake option to curb inflation.
Ajayi-Kadir said: “With the increase in borrowing costs, manufacturers will now pay over 35 per cent on their credit facilities.
‘Clearly, this will lead to increase in production costs, higher prices of finished goods, lower competitiveness and production capacity expansion.”
He noted that “the impact of higher interest rates goes beyond compounding the challenges of manufacturers; it stifles opportunities for investment in crucial areas such as technology, retooling, and expansion within the manufacturing sector.
“Manufacturers will, all the more, be compelled to choose servicing existing credit facilities over expansion and investment in new product lines.
“For instance, over the first six months of the year, manufacturers incurred more than N730 billion in capital expenses due to the continuous rise in interest rates imposed by commercial banks.
“This dilemma hampers innovation, productivity and growth.”
He added that the sector is grappling with depressed consumer demand, primarily driven by lower purchasing power. This decline has severely hampered capacity utilisation within the sector.
According to him, data from the first half of the economic review published by the MAN revealed a troubling trend: the value of unsold finished goods inventory surged by 42.93 percentage points, reaching N1.24 trillion compared to N869.37 billion at the close of 2023.
“This growing stockpile of unsold products underscores the difficulties manufacturers face in a weakening market. The broader implications of these challenges threaten not only the manufacturing sector but also the Nigerian economy as a whole.
“As higher borrowing costs lead to poor access to funds, lower capacities and potential business closures. Truth be told, the capacity to absorb the country’s growing youth population into meaningful employment has diminished significantly with the attendant adverse socioeconomic and security implications.”
MAN also expressed surprised that the CBN is increasing the MPR against the backdrop of the meagre improvement in inflation figures, which could be largely traceable to the onset of the harvest season.
“We also note that this increase is coming at a time that central banks in other climes are either retaining or cutting rates.
“It is, therefore, expedient that government adopt a holistic and balanced approach to policy formulation and decisions, with due consideration of their overall impact on the various sectors of the economy, particularly the productive sector.
“Undoubtedly, price stability is crucial, and so is the survival and growth of the manufacturing sector. This should be top priority at this time and is in line with the government avowed commitment to growing domestic production, creating more jobs and alleviating poverty,” Ajayi-Kadir argued.
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