Local manufacturers have expressed worry that Nigeria’s lingering inflation may remain unabated for a while, going by the recent monetary policy adjustments, which operators believe will worsen the sector’s woes.

According to the Manufacturers Association of Nigeria (MAN), the recent increase of the two monetary parameters, the Monetary Policy Rate (MPR) and Cash Reserve Requirement (CRR), by the Monetary Policy Committee (MPC), will rub-off negatively on other rates and dash the hope for a single digit lending rate for the productive sector in the economy.

The local producers again, noted that the continuous contractionary monetary policy posture without complimentary fiscal support may not effectively reduce the prevailing inflationary pressure on the economy, as the current increase in Consumer Price index as reported by NBS is not largely driven by monetary phenomenon, as self-inflicted weak foreign exchange rate management can be linked to the pressure.

Without necessary measures, the operators noted that the consequences of the MPC decisions will be reflected in increased cost of borrowing by manufacturers, further beyond the extant double-digit rate, which disincentivize new investments in the sector; increased factor costs which feed into high product prices, making the sector uncompetitive; and high product prices, which makes patronage to plummet and lead to huge inventory of unsold manufactured products in the sector.

Others include, high inventory of manufactured products which will trigger a reverse effect in the sector as manufacturing capacity utilization, production, employment, profit and tax contribution to national building will decline.

The Monetary Policy Committee (MPC) in Communique No. 144 of the third quarter 2022 meeting, increased the Monetary Policy Rate (MPR) by 150 base points to 15.5 per cent with an asymmetric corridor of +100/-700 basis points around the MPR and Cash Reserve Requirement (CRR) by 750 base points to 32.5 per cent, while retaining Liquidity Ratio at 30 per cent.

The increase, the Committee stated, was aimed at moderating the high inflationary pressure on the economy and narrowing the gap between the hitherto MPR of 14 per cent and inflation rate which stood at 20.52 per cent in August 2022 to improve the level of real interest rate.

MAN, in a statement signed by its Director General, Segun Ajayi-Kadir, argued that the implications of such increase were grievous.

MAN, therefore, called on the monetary authority to strategically set in motion mechanism for holistic balancing of the real interest rate, which, it argued, is critical to investment, and not just following leading economies to adjust interest rate without considering domestic peculiarities.