Some of President Bola Ahmed Tinubu's economic policies have raised concerns from financial experts.
Nigerians groan in the midst of savage hardship as the removal of fuel subsidies, the Naira's floating rate, and the current Monetary Policy Rate hike from 18.5 percent to 18.75 percent all take place.
The Monetary Policy Committee of the Central Bank of Nigeria has been raising interest rates for more than six months in an effort to combat inflationary pressures, which, according to the National Bureau of Statistics, stood at 22.79 percent in June.
Mr. Folashodun Shonubi, the acting governor of the CBN, claimed that a potential uptick in inflationary pressures brought on by the policy changes was mitigated by the benchmark interest rate's modest increase.
Although the apex banks have made an effort, inflation pressures have not subsided in the last six months.
The CBN had raised the interest rates to 18.75 percent from 16.50 percent in December 2022.
Because of the difficulties Nigerians face, the Tinubu-led administration has implemented a number of policies that have angered stakeholders in the economic sector.
Nigeria’s organized private sector, OPS, the Lagos Chamber of Commerce and Industry, LCCI, and the Nigeria Employers’ Consultative Assembly, NECA, described the recent hike in the Monetary Policy Rate, MPR, by the CBN as a complete contradiction to Tinubu’s pledged commitment to make credit available to businesses and individuals at an affordable rate.
The Daily Post recalls that Tinubu promised on May 29 during his presidential inaugural address that “monetary policy needs a thorough house cleaning. Interest rates need to be reduced to increase investment and consumer purchasing in ways that sustain the economy at a higher level.”
However, the turn of events has continued to threaten the already bleak hope in the minds of Nigerians.
Experts say one of the significant implications of the interest rate hike is that businesses, especially Small and medium-sized enterprises, must pay more to access finances.
Accordingly, they urged the government to consider growth-focused interventions.
An accounting and financial development professor at Lead City University, Ibadan, Prof. Godwin Oyedokun, told the Daily Post in an interview on Monday that the government's decision to hike interest rates does not make sense.
According to him, it is improper for the CBN to keep repeating the same thing that has failed over time and expect improved results.
He said what the government should do at this moment is provide adequate infrastructure and stabilize the prices of goods and services with proper regulatory policies and other growth-driven interventions.
“It does not make sense to continue to do the same thing and expect a different result.
“The CBN has been raising interest rates over time, yet there has been no result because the fundamentals are not there.
“What the government should do is price stabilize, work on the Consumer Price Index, and provide adequate infrastructure, especially electricity. Of Course, price monitoring is critical; if this can be done, inflation will come down,” he said.
Similarly, the Director of the Centre for the Promotion of Private Enterprise, CPPE, Dr. Muda Yusuf, stated that the CBN’s decision to raise interest rates would hurt investors in the real economy.
“The hike in rate would hurt investors in the real economy as they are already grappling with numerous headwinds. These include the spiking energy cost, the depreciating exchange rate, the increasing cost of logistics, weak purchasing power, and spiraling inflation.
“The main drivers of inflation now are the twin problems of rising energy costs and the depreciating exchange rate.
“Meanwhile, the increase in MPR is unlikely to impact inflation significantly. The transmission mechanism of monetary policy instruments on inflation is fragile because of the peculiarities of the Nigerian economy”, he stated.
Also, Idakolo Gbolade, Chief Executive Officer of SD & D Capital Management, lamented that only little effort had been made by the government on the issue of fuel subsidy palliatives, which have caused untold hardship for the people.
He urged the government to take urgent measures to assuage the people’s fears by providing immediate respite.
“The MPC’s decision to further raise interest rates was due to crippling inflation, which the new policy direction of the government has compounded.
“The subsidy removal and exchange rate measures added pressure to the inflationary trend.
“These measures have started yielding positive results as regards government revenues increasing to almost 2 trillion Naira in June 2023.
“However, little has been done on the issue of realistic palliative care for the people, which has caused untold hardships and increased the number of multi-dimensionally poor Nigerians to about 60 percent of the population.
“The Bola Tinubu government needs to take urgent measures to assuage the people’s fears by ensuring that immediate respite is provided for the people.
“The NLC’s impending strike is a fallout of the perceived government’s failure to address the raging economic crisis affecting the Nigerian people urgently”, he stated.