OPS urges reduced interest rates to boost growth

The members of the organised private sector insist that the Central Bank of Nigeria must reduce the 27.50 per cent interest rate to boost economic growth.

In separate interviews with The PUNCH, the OPS called on the Monetary Policy Committee, which sets the monetary policy rate, to signal growth by beginning a phased reduction of the MPR.

According to MPC member Mustapha Akinkunmi, Nigeria’s MPR, which sets a benchmark for lending rates, ranks fifth highest globally.

The PUNCH reported that Akinkunmi revealed that Nigeria’s rates were only lower than those of Argentina (29 per cent), Zimbabwe (35 per cent), Turkey (45 per cent), and Venezuela (59.4 per cent).

Ahead of the MPC’s next meeting on May 19 and 20, the OPS has encouraged lower emphasis on monetary policy orthodoxy, harmony with fiscal policies and a lowered cash reserve ratio to support business expansion.

The president of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, criticised the double-digit MPR, stating that it signalled economic challenges. “Double-digit MPR means there are economic challenges. It should not have been double-digit in the first place,” Idahosa said.

He argued that the classical economic theory of increasing interest rates to curb inflation had not worked for Nigeria. “The MPR had no effect in reducing inflation because the economy is highly import-dependent,” he remarked, adding that the CBN must focus on attracting investments rather than relying solely on MPR adjustments.

Idahosa further explained that some inflationary factors, including exchange rates, have begun stabilising due to CBN policies.

He, however, insisted that a gradual reduction of the MPR was necessary to ease production costs and encourage economic growth. “The slow growth rate in Nigeria is because manufacturers cannot afford to borrow at these rates. The MPR can be reduced by 25 basis points to signal this shift,” he added.

Similarly, the Director-General of the Nigeria Employers’ Consultative Association, Adewale Oyerinde, emphasised that maintaining a high MPR for a prolonged period could stifle economic growth and limit businesses’ credit access.

“A prolonged tight monetary stance will further constrain business expansion and limit credit accessibility, particularly for small and medium enterprises critical to job creation and economic growth,” the NECA DG warned.

Oyerinde urged the MPC to consider a phased reduction of the MPR, proposing a cut of between 150 and 250 basis points (1.5 to 2.5 per cent).

He noted that global monetary trends indicated a gradual easing of policies to boost economic activity, and Nigeria risked being left behind if it failed to adopt a balanced approach. “A well-communicated policy direction will mitigate uncertainties and encourage long-term economic planning by the private sector,” he added.

Meanwhile, the Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, raised the alarm about the danger of a high CRR as he described the current interest rate regime as unsustainable for economic development.

Yusuf joined other OPS members to lament that “the kind of interest rate regime we have now cannot support critical sectors such as manufacturing and agriculture.”

He pointed out that Nigeria has one of the highest CRRs in the world at 50 per cent, which he argued was impeding financial intermediation by banks. “Our economy is not the worst in terms of the macroeconomic environment. So, why should we carry the burden of the highest CRR globally? Something must be wrong somewhere,” he said, stressing the need to ease monetary policy to stimulate growth.

The National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, highlighted the negative impact of high MPR on businesses, stating that it discourages borrowing, increases production costs, and slows demand. “When borrowing costs are high, businesses shrink, and unemployment rises,” he said.

Although he acknowledged that high interest rates could reduce money circulation and inflation, Kuti-George noted that the policy had not worked effectively in Nigeria. “The CBN has been increasing the MPR over time, yet inflation has not declined significantly,” he observed.

Further, the President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, expressed concerns over the high MPR, stating that it discouraged investment and innovation.

“Unlike some peer nations that maintain lower rates to support their real sectors, our businesses are burdened with expensive financing,” Egbesola protested.

ASBON’s president called for a more balanced approach, combining supportive fiscal policies, improved infrastructure, and targeted business incentives to drive sustainable growth, submitting that “simply keeping interest rates high will not solve Nigeria’s economic challenges but will instead slow economic activity further.”

With the next MPC meeting approaching, private sector stakeholders hope the CBN will heed their calls for a gradual reduction in interest rates to foster business growth, encourage investment, and boost economic development.