The Centre for the Promotion of Private Enterprise (CPPE) has expressed strong opposition to the Central Bank of Nigeria’s (CBN) recent decision to raise interest rates, warning that the move will stifle investment and further weaken the country’s struggling economy.
In a statement released on Tuesday, Muda Yusuf, CEO of CPPE, voiced concerns about the implications of the CBN’s monetary policy committee (MPC) raising the monetary policy rate (MPR) from 26.75% to 27.25%. He also criticized the increase in the cash reserve ratio (CRR) from 45% to 50%, as announced by CBN Governor Olayemi Cardoso at the MPC’s 297th meeting in Abuja.
Yusuf argued that the economy needs “oxygen and stimulus,” not tighter monetary conditions that would aggravate an already challenging business environment. He highlighted the difficulties facing manufacturers, entrepreneurs, and other investors, suggesting that the CBN’s policy decisions are ill-timed and harmful.
CPPE: Private Sector Shouldn’t Bear the Cost
Yusuf further pointed out that the private sector should not be penalized for liquidity issues caused by the public sector. He emphasized that the recent injection of liquidity into the economy, as noted by the CBN Governor, is largely driven by public sector activities, and resolving this issue should focus on that context.
“The private sector should not be made to pay the price of liquidity growth which they were not responsible for,” Yusuf stated.
Potential Economic Consequences
Yusuf warned that the increase in CRR to 50% would place additional strain on the banking sector and further escalate the cost of financing for businesses, potentially pushing borrowing costs above 35%. He noted that these conditions would make it even more challenging for businesses to access much-needed capital, further raising operating and production costs.
“We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country,” Yusuf concluded, calling for a review of the central bank’s monetary policies.