THE Centre for the Promotion of Private Enterprise (CPPE) has expressed worries over the recent monetary policy decision of the Central Bank of Nigeria (CBN), lamenting that it would suffocate investment and economic growth.

The CPPE said in a statement of Tuesday, September 24 by its director and chief executive officer of CPPE, Muda Yusuf.

According to Yusuf, the CBN decision would be detrimental to investment and economic growth.

“It is quite troubling that at a time when manufacturers, entrepreneurs and other investors in the economy are craving for a breath of fresh air, the CBN chose to tighten the noose on them by resorting to a further tightening of monetary policy.

“The latest policy choice of the apex bank is at variance with the mood of most economic players and the desire to promote economic recovery and growth.”

The CBN at the end of its two-day bimonthly meeting, raised the monetary policy rate (MPR), otherwise known as the benchmark interest rate, by 50 basis points to 27.25 per cent from 26.75 per cent.

It also raised the cash reserve ratio (CRR) by 500 basis points to 50 per cent from 45 per cent for the deposit money banks, and by 200 basis points to 16 per cent from 14 per cent for merchant banks.

However, the CPPE boss said what manufacturers and other investors needed at this time was some stimulus, and not policy measures that would worsen an already suffocating situation.

“MPR at 27.25 per cent; CRR at 50 per cent, and asymmetric corridor at +500 and -100 are very difficult monetary conditions to bear for most businesses, given the prevailing macroeconomic and structural conditions,” Yusuf lamented.

He noted the second-quarter gross domestic product (GDP) numbers indicated that Nigeria’s economy was still in a floundering mode as many critical sectors slowed.

The manufacturing and other sub-sectors such as cement, food and beverage, chemicals and pharmaceuticals, trade, ICT and real estate decelerated.

Others, including road transport, motor assembly, publishing and motion pictures sectors, contracted during the quarter.

Aviation, oil refining, textile livestock and quarry and minerals sector were still in recession.

Yusuf believes that tightening financial conditions in the circumstances does not seem appropriate.

He said the private sector should not be made to pay the price of liquidity growth not responsible for as issues of excess liquidity should be addressed within a causative context.

He explained that the injection of liquidity into the system was largely public sector driven, as rightly noted by the CBN Governor Olayemi Cardoso.

“Therefore, the focus of resolving it should be within that context. Stifling the financial conditions to address liquidity issues is detrimental to investment and growth of the economy,” he said.

He also believes that the implications of the latest MPC decision for investors are quite concerning as cost funds would be further exacerbated, possibly well above 35 per cent or more.

“It is made worse by the increase in CRR to 50 per cent and retention of the symmetric corridor of +500 and -100.

“We believe that the policy decisions of the CBN are most inappropriate for the prevailing economic conditions and the challenges faced by entrepreneurs in the country.

Yusuf stressed that the operating and production costs of businesses would be further exacerbated by the latest monetary policy tightening.

“The increase in CRR to 50 per cent will constrain financial intermediation with negative consequences for the banking system and the economy,” the CPPE boss added.