The Central Bank of Nigeria (CBN) has increased the Monetary Policy Rate (MPR) by 50 basis points from 26.75% to 27.25%, while retaining an asymmetric corridor of +500/-100 basis points. This decision was made during the 154th Monetary Policy Committee (MPC) meeting, as disclosed by CBN Governor Mr. Olayemi Cardoso.
Eleven out of the twelve MPC members voted in favor of the rate hike, which is expected to influence the interest rates banks charge their customers.
In a related development, the Nigerian Bureau of Statistics (NBS) announced a rise in the country’s unemployment rate by 1.2 percentage points to 5.3% year-on-year. This has raised alarm among small business owners who fear that the new interest rate could lead to job losses and negatively impact the market for locally made goods.
Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), criticized the timing of the rate hike, stating that it would exacerbate challenges faced by manufacturers and other sectors in the real economy. He expressed concern that the increased interest rate would elevate the cost of doing business, potentially pushing many businesses into further contraction.
Egbesola stated, “This definitely will push up the cost of doing business and ultimately the cost of goods and services. The manufacturing sector may contract more as fund liquidity and profitability will surely reduce.” He warned that banks might experience an uptick in bad debts, as borrowers struggle to meet their loan obligations.
In a hopeful note, Cardoso remarked that the upcoming Dangote Refinery could alleviate some pressure in the foreign exchange (FX) market, as 10% to 15% of current FX demand is attributed to petroleum products. He anticipates that the nation’s FX position will significantly improve once the refinery begins exporting products.