I am writing to convey my serious concerns regarding the recent increase in interest rates by the Central Bank of Nigeria (CBN). The Monetary Policy Committee (MPC) has raised the benchmark Monetary Policy Rate by 50 basis points, bringing it to 27.25 percent from the previous 26.25 percent. This marks the fifth consecutive increase this year, resulting in a total rise of 850 basis points since February. This is also the 12th occasion in two years that the MPC has raised rates, as the monetary authorities grapple with rising inflation.
The CBN’s ongoing policy of tightening monetary conditions means that businesses will have to cope with higher borrowing costs. By raising the Cash Reserve Ratio (CRR) for banks, more loanable funds are tied up, which further hinders banks’ ability to facilitate loans.
This situation poses severe challenges in an economy where businesses are already struggling with high energy, logistics, and operational costs, exacerbated by declining purchasing power. These difficulties have led some multinational companies to exit the Nigerian market.
The organized private sector emphasizes the need for stimulus measures to promote recovery and growth. With effective lending rates currently around 35 percent, any further increases in interest rates could have devastating effects on manufacturers and other key players in the economy.
Therefore, I strongly urge the Federal Government, the CBN, and other financial institutions to reconsider the recent interest rate hikes for the benefit of our country and its citizens. There must be a limit to how much interest rates can be raised.
Ayodeji Osinowo, Osogbo, Osun State.
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