LCCI expresses worry on hike, urges CBN to sustain intervention schemes –

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Barely 24 hours after the Central Bank of Nigeria (CBN) announced hike on interest rate, the Lagos Chamber Of Commerce and Industry (LCCI) has expressed concern, saying that the decision will make the economy suffer from massive capital flight with a negative effect on the naira exchange rate.

LCCI made its position known in a press release it issued Wednesday.

In order to avert the effect, the Chamber urged the CBN to maintain its targeted intervention schemes for agriculture, manufacturing/industries, energy, infrastructure, healthcare, exports, and MSMEs (micro, small, medium and small-scale enterprises), as well as other real sectors of the economy.

LCCI stated in addition, development finance loans should be targeted at MSMEs.

“Beyond the goal of stabilizing prices, there are other key goals besides this; full employment, economic growth, and balance of payment equilibrium are equally important.

“While it is expedient to curb inflation rates, we equally risk a contracted economy that may go towards a recession. This calls for the need to embark on targeted financing for critical sectors of the economy to help boost the supply-side” LCCI stressed.

The statement said LCCI noted the gloomy outlook of the global economy which has a direct link to the country’s domestic economy which passes through effects of imports.

The Chamber also established that the lingering war in Ukraine and other disruptive factors may present as risks into the end of the year, stating that a tightening of rates might have been a good decision by the MPC as that was necessary to tame the rising inflationrates in the past months.

“We however reiterate our earlier position that rate hikes or monetary policy instruments alone will not yield the desired result of lowering inflation rate without a corresponding boost to the supply-side factors like FOREX scarcity, insecurity, rising costs of fuels, and weak infrastructural support for production” the release maintained .

While admitting that the CBN rate hike was considered to be a necessary option, given that most other economies are raising rates for the same reason of taming inflation, still, LCCI affirmed that a comparatively low interest rate could make “our portfolio assets less attractive to asset buyers and offshore investors”.

Recall that the CBN Monetary Policy Committee Tuesday, at its third meeting this year hiked the MPR from 13 percent to 14 percent in response to the surging inflation rate that hedged up to 18.60 percent as at June 2022.

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