New CBN interest rate’ll increase unemployment – Small business owners

Small business owners have described the new Central Bank of Nigeria, CBN, Monetary Policy Rate, MPR, as unfortunate, and capable of further contracting businesses.

They added that as businesses contract, firms will downsize, leading to loss of jobs.

Recall that yesterday the CBN raised the MPR by 50 basis points from 26.75% to 27.25%. But it retained the asymmetric corridor of +500/-100 basis points.

The CBN governor, Mr Olayemi Cardoso, disclosed this at the end of the 154th Monetary Policy Committee, MPC, meeting in Abuja yesterday.

He said the decision to further hike the rate was that of 11 of the 12-member Monetary Policy Committee, MPC, present at the meeting.

The MPR, set by the MPC of the CBN, is a benchmark of the interest rate charged by banks to their customers.

Meanwhile, the Nigerian Bureau of Statistics, NBS, also yesterday, announced that Nigeria’s unemployment rate grew by 1.2 percentage points to 5.3 per cent year-on-year, YoY.

Hence, the alarm raised by small businesses.

The new interest rate, they said, will make many lose their jobs, while businesses will be bad for made-in-Nigeria goods.

‘This is unfortunate’

Reacting to the new interest rate, small business owners joined other stakeholders to fault the CBN policy. They said it was the wrong time to raise rate.

The President of the Association of Small Business Owners of Nigeria, ASBON, Dr Femi Egbesola, said the move would lead to further contraction in the real sector of the economy.

He said: “It’s unfortunate that this is coming again at this time when manufacturers and actors in the real sector are still grappling with the high cost of doing business, among many other challenges.

“This definitely will push up further 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.

“The banks or financial institutions may witness more bad debts as many lenders may find it difficult to live up to their loan obligations. This will result in banks being averse to lending to the real sector.

“The economy may likely contract further, forcing the actors in the real sector to downsize their production capacities, human resources, expenditure and further exposure to loans.

“We may begin to see more ailing or comatose businesses. Our competitiveness in the national, continental and global business will be further be challenged as Made-In-Nigeria products will be naturally more expensive than before.”

Dangote Refinery

Meanwhile, yesterday also, Cardoso expressed optimism that the Dangote Refinery will reduce pressure in the FX market as, according to him, between 10 and 15 per cent of current FX demand was for petroleum products.

He added that the nation’s FX position will greatly improve once the exportation of products from the refinery becomes a reality.