LCCI counters CBN on rate, says hike won’t tame galloping inflation
The Director General of Lagos Chamber of Commerce and Industries (LCCI), Chinyere Almona has observed that the move by the Central Bank of Nigeria (CBN) by increasing the interest rate would not tame inflation and suggested that alternative instruments of monetary policy should be preferable in achieving the anticipated results of price control.
In statement issued in Lagos, Alumona averred that “While the CBN has the overarching mandate of ensuring price stability, we suggest it should not be done in a manner that compromises growth, especially in the face of high unemployment.
“Inflation chips away at purchasing power, leads to inventory stockpiles, undermines growth, and creates a lot of economic uncertainties. Taming it, however, should not be done at the expense of growth and the most vulnerable sectors.”
In the same vein, Muda Yusuf, Director, Centre for the Promotion of Private Enterprise, said that the increase in the interest rate would directly affect investors. This decision, according to him, will lead to increased burden to both local and foreign investors.
Yusuf, who is also a former director of the LCCI, said that the CBN would have been more empathic in its policy, considering the pains brought by the gradual relaxation of the cash crunch.
However, some other economic analysts believe that the 18 per cent increase could worsen the inflationary trend. For instance, Muktar Muhammed, a financial analyst, argues that the shortage of banknotes and its effects on the economy could not necessitate a hike in interest rates. He added that inflation was already high, thus, increasing the rates, together with the scarcity of cash would not help the economy.
“The challenge with Nigeria is not just that we are dealing with an inflation that has to do with single-digits, we are also dealing with an inflation that is driven by three major factors.
Recall that while speaking at the last meeting of the Monetary Policy Committee, MPC, of the central bank, Godwin Emefiele, Governor of the CBN, noted that the apex bank decided in favour of the decision to increase the benchmark interest rate by 50 basis points and pegged the liquidity ratio at 30 per cent in order to check inflation, which currently stands at 21.91 per cent by tightening the rate.
“The rate of acceleration or increase in inflation has slowed down because of the tightening measures adopted by the CBN.
“The MPC was convinced that the tightening measures have started to reduce the rate of increase in inflation. We believe that as we continue this process, inflation will begin to trend down,” Emefiele said.
He added that the Nigerian economy has maintained a positive growth trajectory for nine consecutive quarters, since exiting recession in 2020, noting that the improved performance of the economy has been driven largely by sustained growth in the services and agricultural sectors.
However, despite the projections of the central bank, there appears to be some reservations by some economists and other stakeholders. Although some of them agreed that tightening the interest rate has a direct relationship with taming inflation, others still believe that the country does not need a strict economic policy as the nation is still battling with some economic issues such as cash crunch, political instability, insecurity among others, thus wishing that the CBN would have adopted other viable options to address the rising inflation.
