Implication of Nigeria’s interest rate hike on manufacturers
Manufacturers in Nigeria say the increase in the Monetary Policy Rate to 13.5 per cent by the Monetary Policy Committee of the Central Bank of Nigeria will spur an upward review of existing lending rates. According to the Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, future adjustments of rates should take into consideration the trend of core inflation rather than the headline and food inflation. He joins CNBC Africa to discuss this.
Mon, 30 May 2022 11:55:38 GMT
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AI Generated Summary
- Impact of interest rate hike on ongoing lending facilities and consumer demand
- Challenges posed by rising costs and insecurity on manufacturing performance
- Recommendations to mitigate effects of interest rate hike on manufacturers
Manufacturers in Nigeria are grappling with the implications of the recent 1.5% increase in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria, the first hike since 2016. Segun Ajayi-Kadir, the Director-General of the Manufacturers Association of Nigeria, expressed surprise at the rate hike, emphasizing the challenges it poses for the sector. The surge in interest rates is expected to lead to an upward adjustment in lending rates, impacting ongoing loan facilities contracted by members with banks. This move comes at a time when costs have been on the rise in the first quarter of the year, creating additional pressure on manufacturers. Ajayi-Kadir highlighted the issue of dwindling disposable income among citizens, affecting consumer demand and ultimately leading to increased inventory levels and reduced capacity utilization. In addition to the interest rate hike, the prevailing insecurity across the country has further disrupted manufacturing operations, compounding the challenges faced by the sector.
