The Chief Executive Officer of The Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, has voiced concern about the effects of the rising monetary policy rate (MPR) on the economy. He emphasized that this increase is harmful to both the investment and overall economic growth in the country.
The CBN Governor Olayemi Cardoso announced a fresh rate increase from 26.75 percent to 27.25 percent during the CBN’s Monetary Policy Committee (MPC) meeting. He also stated that the Cash Reserve Ratio (CRR) has been raised by 50 basis points increasing it from 45 percent to 50 percent for Deposit Money Banks (DMBs) and from 14 percent to 16 percent for Merchant Banks.
In response to the rate hike, the CPPE expressed that the CBN’s decision to continue tightening contrasts with the sentiments of many economic players who seek to foster recovery. They emphasized that investors and manufacturers need support and stimulus rather than policies that could worsen an already challenging environment. The current monetary conditions, including an MPR of 27.25%, a CRR of 50%, are burdensome for most businesses given the existing macroeconomic challenges.
The CPPE director explained that the private sector should not be made to pay the price of the liquidity growth which they are not responsible for but focus on the public sector which provides most of the extra money in the system.
Mr. Yusuf expressed concern that the latest MPC decision has serious implications for investors, as the cost of funds is likely to rise even further, potentially exceeding 35%. The situation is worsened by the CRR increase to 50%. He cautioned that this rise in the CRR could negatively impact both the banking system and the overall economy.
According to the Director, “We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country”.
He concluded by stating that the latest monetary policy tightening would further increase the operating and production costs for businesses.
