Financial experts and entrepreneurs want the federal government, through the Central Bank of Nigeria (CBN), to cut the Monetary Policy Rate to loosen lending in the economy.
The Monetary Policy Committee (MPC) of the CBN retained Monetary Policy Rate (MPR), which is the benchmark interest rate in the country, at 14 per cent last Tuesday contrary to expectations of experts.
Entrepreneurs and experts say that tightening lending at this point will not help the economy create sufficient jobs.
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Bismark Rewane, CEO of the Lagos-based Financial Derivatives Company, a consulting firm, said reducing the MPR will stimulate the economy.
Rewane said instead of being cautious and not taking action, it would have been better to cut rates now to steer economic activities.
Jon Kachikwu, chairman of SME Group at the Lagos Chamber of Commerce and Industry, said the interest rate in the country, which hovers between 18 and 35 per cent, cannot stimulate start-ups and SMEs to create sufficient jobs. “I don’t see how SMEs will not close down with this kind of interest rate we have today,” said Kachikwu said.
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Kachikwu said at a period China is charging between one and two per cent rate, Nigeria is charging well above 20 per cent, adding that this is not healthy.
Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), said at a recent press briefing that what is needed at the moment is a single-digit rate to steer the economy.
“What we need is an interest rate of five per cent. We believe that this is what can stimulate SMEs and manufacturing,” Jacobs said at a recent event in Lagos.
Nigeria has 37 million SMEs, contributing 47 per cent to the gross domestic product (GDP). They create over 60 per cent in the economy, according to aggregated data obtained by Start-Up Digest.
Friday Opara, director-strategic partnership, Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), recently said: “We need to look at our funding position for SMEs because businesses cannot access cheap funds, and this is why the government should fast track central bank movable asset collateral initiative.”
Odinaka Anudu
