NIMN chief faults frequent increase in lending rates

PRESIDENT of National Institute of Marketing of Nigeria (NIMN), Chief Lugard Aimiuwu, yesterday, advised the Central Bank of Nigeria (CBN) against constant increase in lending rates.

Aimiuwu told the News Agency of Nigeria (NAN) in Lagos that frequent increase in lending rates would affect the growth of the real sector, particularly agriculture and small scale enterprises.

Aimiuwu was speaking against the backdrop of the increase in Monetary Policy Rate (MPR) from 7.5 per cent to eight per cent on Tuesday.

The MPR is the rate that CBN lends to banks and the nominal benchmark of lending rates in the economy.

The apex bank also increased the cash reserve ratio from two per cent to four per cent, all in the bid to check inflation.

Aimiuwu said that the increase in the MPR from 7.5 per cent to eight per cent would have multiplier effects on banks’ lending rates and the economy.

“Frequent increase in lending rates, in my opinion, is not a people- friendly policy, as the brunt of the policy will be felt majorly by those in agriculture, micro and small scale enterprises.

“All the sectors of the economy will feel the impact of the 50 basis point increase because the cost of doing business will rise and lead to higher prices of goods and services.

“The country is groaning from inefficiency in production. Agriculture is a source of food supply, security and we export to generate revenue for the country.

“Many small-scale entrepreneurs hardly make up to five per cent profit from their businesses and already many companies are moving to other countries where there is enabling environment for businesses

“So, the 50 basis point increase will surely affect the economy,” he said.

Aimiuwu added that while more developed countries were always looking for ways to reduce their lending rates, the reverse has been the case in Nigeria.

He advised that the CBN must critically examine the issues regarding lending rates in the country, if Nigeria must compete favourably in international trade.