LCCI urges CBN to peg interest rate at 18.75%

…Businesses may cut labour force to stay afloat

The Lagos Chamber of Commerce and Industry (LCCI) has called on the Central Bank of Nigeria (CBN) to pause its interest rate hike.

 LCCI  made this submission ahead of next week’s Monetary Policy Committee (MPC) meeting scheduled for Monday, September 25 and Tuesday, September 26,

 The Lagos chamber said in a statement signed by its Director-General, Mrs Chinyere Almona, that this had become  necessary to relieve Nigerians of the pressure on the supply side following a further surge in the inflation rate.

 Almona  said  because of the prevailing harsh situation in the country, businesses may have to cut labour force in addition to sourcing inputs locally, among other strategies, to lower the cost of operation amid inflationary pressures, in order to stay afloat

The National Bureau of Statistics (NBS) had  revealed last Friday that the average cost of goods and services rose by 25.80 per cent in August 2023 from 24.08 per cent in July 2023.

The CBN, at its meeting in July, raised the Monetary Policy Rate (MPR) by 25 basis points to 18.75 per cent from 18.00 per cent.

The LCCI urged the Federal Government to implement prudent fiscal policy measures, noting that the slow pace of headline inflation month-on-month may be an indication that the path of price movements remains unclear in the near term.

As a result, the chamber anticipates businesses will implement a variety of cost reduction strategies, including downsizing and local sourcing of input factors as they bid to lower operating expenses.

“Also, household real income will continue to experience decline, especially in the near term,” the organisation said.

It recommended that the government should implement prudent fiscal policy measures, particularly in terms of borrowings as well as address the challenge of food inflation by immediately reducing/ removing tax on basic food items to protect the most vulnerable.

“We implore the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents,” the LCCI stated.

The chamber explained that the increased inflation rate represents 1.72 per cent points higher than the previous month and 5.28 per cent points when compared to 20.52 recorded in the corresponding month in 2022.

“On a month-month basis, inflation, however, moderately increased to 3.18 per cent, 0.29 per cent points rise compared to the 2.9 per cent surge in the previous month.

“Also, food inflation rate increased to 29.37 per cent, implying a 2.36 percentage points increase when compared to 26.98 per cent the previous month and 6.22 per cent points increase compared to 23.12 per cent points in the corresponding month in 2022.

“Similarly, core inflation increased to 21.15 per cent, 0.68 per cent points and 4.03 per cent points increase when compared to 20.47 per cent in July 2023 and August 2022, respectively.

“In terms of contributions of items, the data revealed that food and non-alcoholic beverages contributed the highest to the price increase at 13.36 per cent followed by housing water, electricity, gas and other fuel (4.32 per cent), clothing and footwear (1.97 per cent), transport (1.68 per cent) and furnishing & household equipment & maintenance (1.30 per cent),” it said.