In a statement released on Friday, the Lagos Chamber of Commerce and Industry (LCCI) expressed deep concern over the adverse effects of the high-interest rates on the Central Bank of Nigeria’s (CBN) Treasury bills.
The Director-General of LCCI, Dr. Chinyere Almona, noted the detrimental impact these rates are having on the private sector, redirecting funds away from business expansion and development.
Dr. Almona acknowledged the CBN’s efforts in curbing inflation and stabilizing the exchange rate but stressed the importance of achieving these objectives without stifling private sector growth. She particularly highlighted the plight of Small and Medium Enterprises (SMEs).
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“The recent hikes in the MPR have directly translated into higher interest rates, making it more expensive for businesses to access credit for working capital, expansion, and sustainability.
“We have consistently advised that rate hikes alone will not curb inflation without resolving challenges of the real sector of the economy,” she said.
While acknowledging that high interest rates may attract both foreign and local investors to government treasuries, she lamented the consequences of funds being diverted away from the private sector.
“The real sector has demonstrated the capacity to create more jobs, manufacture products for consumption and export, and sustain the industrial base of the economy.”
“While we understand that high-interest rates attract Foreign Portfolio Investments and local investors to treasury bills and bonds, we lament the drying up of funds away from the private sector to government treasuries,” she said.
In addition to concerns about interest rates, Dr. Almona also addressed the issue of electricity subsidies. While recognizing the potential for attracting foreign investment through realistic pricing, she expressed worry over the disproportionate burden placed on businesses due to unreliable service provision despite increased tariffs.
She advocated for a comprehensive metering initiative to ensure accurate billing for all electricity consumers.
The backdrop to these concerns lies in the CBN’s aggressive sale of Treasury bills since the first quarter, with interest rates ranging between 19% and 22%, nearly aligned with the Monetary Policy Rate (MPR) of 24.75%. This move was aimed at mopping up excess liquidity in the economy to curb inflation.
According to analyses, the CBN is expected to spend approximately N1.01 trillion in interest rates to defend the naira.
The LCCI’s position stands in support of calls by economic experts on the urgent need for a balanced approach by the CBN, one that addresses inflationary pressures without stifling private sector growth. They have called for collaborative efforts between monetary authorities and stakeholders to create an enabling environment for sustainable economic development.