The Lagos Chamber of Commerce and Industry (LCCI) has frowned at the retention of Monetary Policy Rate at 14 per cent, saying “The retention of the rates is only good for portfolio investors and this economy is tired of such investors because they are not coming to stay but to reap and run away while real sector investors continue to suffer”.
After its two days meeting which started on Monday ended on Tuesday, Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) said even though it retained the rates, two members of the MPC voted for reduction but their decision failed to make the majority.
The CBN Governor, Mr. Godwin Emefiele who announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in Abuja explained that the six members of the committee agreed to maintain the current monetary policy stance.
In an interview shortly after the announcement by the CBN, the Director General of LCCI, Muda Yusuf decried the rates retention, stressing that “High interest rate on treasury bills, federal government bonds are frustrating debt serving profile”.
“The debt profile is so high now and has reached an unsustainable level because we are now spending over 60 per cent of revenue to service debts. To us at LCCI, we believe that bringing down interest rate will impact positively in managing our debt servicing.
According to him, “CBN told us that in the first half of the year, it had a deficit of over N2tn and you cannot distance the problem from the challenges of high interest rate which translates to high cost of borrowing as can be seen in high treasury bills and federal government bonds”.
“To me, it is not in the interest of this economy for us to continue in this trajectory. We will continue to make our position known that this economy deserves much lower interest rate.
More important is to improve access to credit.
Yusuf said “For many of the SMEs, even getting credit at the high 25 or 30 per cent is not the problem, but access to the credit. When you have economy where SMEs account for over 50 per cent of GDP and they account for less than one per cent of the credit, it means that something is fundamentally wrong with that economy”.
In his further submission, the DG of LCCI averred that “Not reducing the interest rate is not the best way to stimulate the economy or grow an economy that is inclusive because inclusive economy will depend more on small businesses”.
“Here in Nigeria, there is no connection between the banking system and the SMEs and that is why the sector cannot grow to drive the economy as supposed,” Yusuf said.
According to the CBN Governor, apart from the MPR which was retained at 14 per cent, the committee also retained the Cash Reserves Ratio at 22.5 per cent.
Also retained are the Liquidity Ratio which was left at 30 per cent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.