The Manufacturers Association of Nigeria, the Nigeria Employers’ Consultative Association and the Lagos Chamber of Commerce and Industry have called on commercial banks to reduce interest rates on credit facilities in order to encourage more ailing businesses to borrow.
Praising the Central Bank of Nigeria for the recent cut in the Monetary Policy Rate, they also urged the apex bank to cut the rate further as well as the Cash Reserve Ratio.
Reacting to the decision of the CBN to reduce MPR from 13.5 per cent to 12.5 per cent and retain the CRR at 22.7 per cent and the liquidity ratio at 30 per cent, they said high interest rate was a risk to the economy during this period when many businesses were struggling to stay afloat.
They also called on the government to provide stimulus packages for sectors that had been worst hit by the coronavirus pandemic and lockdown.
The Director-General, LCCI, Dr Muda Yusuf, described the reduction in the MPR as an accommodative policy decision.
He, however, stated that the impact of the MPR reduction on liquidity might not be substantial, saying the adjustment of the CRR would have had more impact on the economy.
Yusuf said now more than ever, the economy needed all the stimuli it could get to rebound and not plunge into recession.
He said, “The reduction by the MPC of the MPR from 13.5 per cent to 12.5 per cent was a pleasant surprise. It has good signalling effect for the economy, pointing in the direction of accommodative monetary policy disposition of the CBN.
“But adjustment of the CRR would have been more impactful as a stimulus.”
He urged the apex bank to prevail on the commercial banks to give robust reprieve to businesses struggling with the severe shocks inflicted by the COVID-19 disruptions.
Also, the Director-General, NECAS, Mr Timothy Olawale, said the reduction of the MPR was a good move by the monetary authority as it would stimulate the economy.
According to him, retaining the CRR at 22.7 per cent and liquidity ratio at 30 per cent is a move to manage the currency in circulation vis-à-vis the inflationary figure.
Olawale said, “Our country’s economy is over-exposed to external shocks. Therefore, in order to reduce the shocks, it is apparent to stimulate the economy by reducing the cost of borrowing and attract investment.
“Ordinarily, the MPC decision should lead to a lower interest rate that banks will charge on its loan facilities.
“However, the intervention of the monetary authority under the supervisory committee and bankers’ committee would help in driving home the good intention of CBN for the interest of the nation on commercial banks and other financial institutions.”
The acting Director-General, MAN, Ambrose Oruche, said a single digit MPR would have been beneficial for businesses as they would be encouraged to borrow more and increase money in circulation.
He urged commercial banks to offer credit facilities at attractive interest rates that would create more wealth for Nigerians.
Oruche said, “The commercial banks should be able to also join the CBN in reflating the economy by giving loan facilities at reduced interest rate but if the MPR is 12.5 per cent, the banks will not be able to give credit facilities lesser than 12.5 per cent.”
According to him, high-interest rate on credit facilities will encourage loan default considering the challenging economic situation most businesses are facing.
A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, said a time like this when there was economic challenge required a reduction in interest rates.
Advocating for more cuts, Nzekwe said, “I still want the interest rate to be single digit, but what they are talking about is that lending rate cannot be below the inflation rate.
“I believe that what is actually causing the inflation is not putting infrastructure in place because anybody who does business with generator, it will be expensive and that is why we are saying let there be infrastructure.”
Uche Uwaleke, a professor of capital market, urged the CBN to measures in place to ensure that the cut MPR translates into lower lending rates.
Source: punchng
