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Interest rate hikes affecting productivity – LCCI - PUNCH

FEBRUARY 04, 2023

The Lagos Chamber of Commerce and Industry has warned the Central Bank of Nigeria against frequent benchmark interest rate hikes, the saying was hampering productivity and, thereby, weakening the economy.

In a statement signed by the Director-General of the chamber, Chinyere Almona, the LCCI claimed the stunted economic growth may force organised businesses to lay off workers.

It urged the apex bank to look at the peculiar situations driving inflationary pressures within the Nigerian economy instead of resorting to indiscriminate rate hikes.

The CBN reviewed interest rates upward five times in the last year in an attempt to tame accelerating inflation, which rose for 10 consecutive months to a 17-year high 21.47 per cent in November, before decelerating to 21.34 per cent in December.

The LCCI urged the Federal Government to urgently tackle food inflation which has been the main driver of the country’s inflationary pressure.

It also advised the government to combat the soaring inflation rate through targeted support to the agriculture and manufacturing sectors and the provision of more export infrastructure for businesses to export more and earn more.

The statement read in part, “We urge the CBN to look further inward at the peculiar situations driving inflationary pressures within the Nigerian economy. Rate hikes are known to weaken growth, and as such, it is expected that the monetary and fiscal authorities intervene with policies and instruments that are growth-boosting. We are also calling on the government to commence preventive measures against the expectation of flooding in 2023.

“Further, the increase in the policy rate will put pressure on businesses with the resultant effect of rising operating costs which can lead to workers’ layoffs and low productivity. This was our major concern regarding the implementation of more taxes, as provided in the 2022 Finance Bill. We urge the government to consider streamlining these issues such that they do not swamp businesses and render them unproductive and uncompetitive.”

According to the chamber, policymakers need to consider more actions to increase and stabilise oil production levels to earn more forex, adding that better coordination of fiscal policies can complement the deployment of monetary instruments by the CBN.

The West African oldest chamber of commerce also advised businesses to look inwards for raw materials instead of waiting for the CBN to allocate forex to them.

“We have consistently advocated for a more friendly policy/business environment that will attract foreign and domestic investment and improve productivity, particularly domestic food production.

“While we commend recent strides in dealing with insecurity, we ask for more deployment of technology and surveillance apparatus, particularly as we approach the general elections in weeks. Weak power supply, scarcity of forex, and expensive logistics due to fuel scarcity are critical issues that must be closely watched and attended to with effective policies and fiscal instruments,” the statement noted.


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