Raising interest rate alone will not tackle inflation, LCCI tells CBN

The Lagos Chamber of Commerce and Industry (LCCI) has advised the Central Bank of Nigeria (CBN) to roll out more friendly supply-side policies to boost productive sectors.

Michael Olawale-Cole, LCCI president, said this on Tuesday in Lagos at the chamber’s third quarterly media briefing in 2022 on the state of the Nigerian economy.

In May, CBN raised its benchmark interest rate to 13 percent to curb rising inflation.

But the Lagos chamber said the rate hike alone would not curb inflationary pressures.

It emphasised the need for the apex bank to pay attention to boosting supply and cushioning rising production costs caused by the high cost of energy and raw materials.

“While the Central Bank of Nigeria (CBN) embarks on monetary tightening to tame inflation, it should ensure that targeted concessionary credit to the private sector is sustained for MSMEs,” Olawale-Cole said.

“The CBN needs to initiate a gradual transition to a unified exchange rate system and allow for a market reflective exchange rate.

“The CBN also needs to roll out more friendly supply-side policies to boost productive sectors, bolster investor confidence and help attract foreign investment inflows into the economy.”

“We reiterate our position on the rising inflation that rates hike alone will not take rising inflation. The government must invest more in boosting supply and cushioning the cost of production.

“There is a need to address structural bottlenecks and regulatory constraints that contribute to the high cost of doing business.

“A supportive and conducive investment environment is critical in facilitating private sector involvement in the economic recovery and growth process.”

The chamber said the burdening impact of fuel costs on businesses would remain as long as Nigeria keeps importing refined fuel.

It recommended the removal of petrol subsidies and curtailing oil theft to provide fiscal space for subsidised production of goods and services as well as for infrastructure, health, and education financing.

It added that boosting local refining will resolve the worsening crises in fuel supply and its multiplier effects on production and prices.

On the frequent collapses of the national grid, LCCI urged the government to initiate cost-reflective tariffs in the power sector.

According to the chamber, this will attract the needed investment to boost the power supply and possibly end the problem.

On the Academic Staff Union of Universities’ (ASUU’s) ongoing strike, Olawale-Cole appealed to the government and the union to resolve the issues surrounding the education sector amicably.

“The Lagos chamber and the business community are concerned, as this negative development can worsen our security challenges, increase drug abuse among our youth, and raise our social vices,” Olawale-Cole said.

“We cannot look to half-baked graduates to build a prosperous economy.

“Nigeria must begin to pay more attention to improving its latest Human Development Index (HDI), which stood at 161st out of 189 countries.”