I am writing to strongly express my concerns about the hike in interest rates by the Central Bank of Nigeria (CBN). The Monetary Policy Committee (MPC) of the CBN has raised the benchmark Monetary Policy Rate by 50 basis points to 27.25 percent from 26.25 percent. This is the fifth consecutive hike this year, totalling 850 basis points since February. It is the 12th time the MPC has raised rates in two years as the monetary authorities battle high inflation.
The CBN’s persistent monetary tightening stance means businesses must cope with higher borrowing costs. Increasing the CRR for banks means more loanable funds have been sterilised. This further impairs the financial intermediation capabilities of banks.
It has grave implications in an economy where businesses are already reeling from high energy, logistics, and operating costs compounded by declining purchasing power which has forced some multinationals to abandon Nigeria.
The organised private sector insists businesses need stimulus to drive recovery and growth. With effective lending rates hovering around 35 percent, further rate hikes will have a crippling effect on manufacturers and other economic players.
Therefore, I urge the Federal Government and the CBN and other financial institutions to see the need to reconsider the increase in interest rates for the betterment of the country and its citizens. There must be a limit to interest rate hikes.
Ayodeji Osinowo, Osogbo, Osun State.
READ ALSO: Reps issue seven-day ultimatum to Wale Tinubu, Aiteo MD over Nembe oil spill creek
