An outcry against the most recent increase in the Monetary Policy Rate (MPR) from 26.75 percent to 27.25 percent has come from the Manufacturers Association of Nigeria (MAN).

According to the group, the industry was already facing difficulties, such as growing manufacturing costs in the face of falling consumer spending power. These would be made worse by the hike.

In a public statement titled “Reaction of MAN on the Report of MPC Meeting on September 23-24, 2024,” MAN Director General Mr Segun Ajayi-Kadir stated on Thursday that the organisation is concerned about the effects of ongoing rate increases on the productive sector and sincerely hopes that the CBN will halt the rate hike and investigate more of the monetary-fiscal policy handshake option to reduce inflation.

According to Ajayi-Kadir, manufacturers will now pay more than 35% on their credit facilities due to the increase in borrowing charges.

“It is obvious that this will result in higher production costs, higher finished goods prices, decreased competitiveness, and increased production capacity.”

According to him, “the impact of higher interest rates stifles opportunities for investment in crucial areas such as technology, retooling, and expansion within the manufacturing sector; it goes beyond compounding the challenges of manufacturers.”

Manufacturers will be forced to prioritise servicing their current loan arrangements above growing their business and investing in new product lines.

For example, during the first half of the year, manufacturers paid approximately N730 billion in capital expenses as a result of the ongoing increase in commercial banks’ interest rates.

“Innovation, productivity, and growth are hampered by this dilemma.”

He continued by saying that decreased purchasing power is the main cause of the sector’s poor customer demand. The sector’s capacity utilisation has been significantly hindered by this decrease.

The value of unsold completed products inventory increased by 42.93 percentage points to N1.24 trillion at the end of 2023 from N869.37 billion, according to data from the first half of the economic review released by the MAN. This is concerning, he claims.

This expanding inventory of unsold goods highlights the challenges faced by businesses in a contracting market. These problems have wider ramifications that endanger not just the manufacturing industry but the Nigerian economy overall.

Because greater borrowing costs result in less capacity, harder access to capital, and sometimes even business closures. In all honesty, there is now far less potential to find meaningful job for the nation’s expanding youth population, which has negative socioeconomic and security ramifications.

The limited improvement in inflation numbers, which can be attributed primarily to the start of the harvest season, has left MAN equally taken aback by the CBN’s decision to raise the MPR.

Additionally, we observe that other central banks are either maintaining or lowering rates at the same time as this hike.

As a result, it is advisable that the government formulate policies and make choices using a comprehensive and balanced approach, taking into account the policies’ overall effects on the many economic sectors, especially the productive sector.

Price stability is unquestionably important for the industrial sector to survive and expand. This is the government’s declared commitment to increasing domestic output, generating jobs, and reducing poverty, thus it should be given top priority right now, according to Ajayi-Kadir.