The
Manufacturers Association of Nigeria’s plea to the Central Bank of Nigeria
(CBN) for a reduction in interest rate, which came after the meeting of the
Monetary Policy Committee (MPC) and CBN governor, Godwin Emefiele’s retention of,
among other rates, the subsisting Monetary Policy Rate (MPR) at 14% was,
unarguably a cry from the heart. Its hopes for a reduction having been so
dashed, MAN should go beyond pleas and take concrete steps to keep its members
in business.
Pointing out
that, with MPR at 14%, domestic production would not be boosted and the economy
would not be revived. It went further to highlight that by retaining
high-interest rate, manufacturers would neither be able to sustain nor even
expand their businesses at a profit, a situation likely to necessitate
reduction in the number of employees in the sector with several negative social
implications for the country.
Whether
MAN’s request will be met at the end of the next MPC meeting cannot be
determined based on MAN’s emotions. What will rank highest in skewing the
present situation to meet MAN’s expectations will be the nation’s economic
fundamentals. It is perhaps, important to point out that the present base-line
interest rate at 14% is below inflation rate of 18.3% recently announced by the
National Bureau of Statistics (NBS). This means that both savers and investors
are ‘reaping’ negative returns of a minimum of 4.3%.
Such a
return will neither encourage savings nor investments. It is normally in the
search for some positive returns that financial institutions with money to lend
do so at interest rates higher than both Monetary Policy and inflation rates.
If credit is dispensed otherwise, it will be impossible for providers of funds
to continue to do so. Indeed, they will seek and go where their funds will
yield positive returns. In such situations, the economy suffers even more.
Now, it is
very simplistic for MAN to beg the CBN for interest rate cut and to seek public
sympathy. MAN, given its membership diversity and capacity, is expected, as a
responsible and long-standing organisation, to interrogate the basis upon which
the CBN reached its decisions on interest rate, evaluate such basis and come up
with an informed, incontrovertible and convincing position that should
necessitate CBN’s favourable consideration of its request. Until it is able to
do that, MAN will only be relying on emotions to drive a serious economic and
financial matter.
What this means, therefore, is that MAN should have a very strong research and development capacity either within its human resources or such can be outsourced to reputable and experienced institutions that abound within the country. Indeed, MAN should be able to develop partnerships with tertiary institutions of strong research capacities and capabilities. With such capacity, it will be easier for the organisation not only to constructively demand, but to challenge policies, regulations and even laws that are against the interest of its members and the general public. While MAN may close its eyes and call for incentives or special considerations for its members to enable them improve productive capacity, it must also see alternative sources of funds at low interest rates. Beyond available low-cost credits within the country, most members of MAN, should by now be in a position to access and attract lower cost funds from the international financial markets.
Although the
manufacturing sector may deserve assistance from government, especially in the
importation of essential raw materials and machinery that are not available
locally, that should not be a justification for soliciting special
dispensations that may negatively affect the on-going financial and economic
deregulation regime. In fact, the current depression should cause manufacturers
and other economic agents to restrategise and innovate so that the nation will
emerge from the problem faster, stronger and more resilient.
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