Monetary parameters for Q3 2021: MPC policy should stimulate real sector—MAN
Monetary parameters for Q3 2021: MPC policy should stimulate real sector—MAN
The Director General of Manufacturers Association of Nigeria (MAN) , Mr.Segun Ajayi-Kadir , has advised the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) billed to meet this week to come up with a policy that will stimulate the real sector in order to the accelerate the pace of economic recovery.
The MPC of CBN may be meeting on Monday and Tuesday (26th &27th) to deliberate on monetary parameters for Q3 of 2021 and what to do to avert the predicted reversal of economic recovery.
Kadir , who was responding to question by journalists said “intentional initiation of a production focused Monetary Policy with enormous capacity to ensure price stability, improve access to long term loan at manufacturing friendly rate and reduce the rising wave of unemployment that may hit 40% if something urgent is not done.
“What appears plausible in times like this is to reduce MPR to stimulate the flow of funds to the real sector or at the least, retain prevailing rate to guarantee certainty, stability and in a way, sustained productivity. In addition, the CRR and BLR could be retained at the prevailing rates.
“Cumulatively, these should promote price stability, potentially ramp up production, possibly create more job opportunities and may not jeopardize the current flow of credit to the real sector, households and other ancillary firms.
“It is however expedient to state that all the above analysis are also highly dependent on the vagaries and turn-out of macroeconomic fundamentals as well as other economic developments, he said.
The implication of the aforementioned, a priori expectation largely depends on the practical relationship between MPR and Commercial Bank Lending Rate.
If MPR is reduced or retained, lending rate will be reduced or stabilized and should any of these happen, the following are the likely implication for the manufacturing sector: improved availability of credit at affordable cost to manufacturers; stability of rates to improve planning and projections horizon; increase in new manufacturing investment, expansion of products lines and sustenance of existing ones and increase in the operation of Medium, Small and Micro manufacturing businesses, particularly during this particularly difficult time.
Other implications include increase in utilization of existing capacity and possible expansion; improved manufacturing employment; increase in patronage of locally manufactured products as credits are extended to household; and high manufacturing activity which would lead to increased contribution to Real GDP by the sector
According MAN DG , to avert the predicted economic recovery reversal that was alluded to, the general expectation is that government will take steps to guarantee the continued operation of the economy, step up enlightenment in on safety measures to manage the spread of COVID-19, avoid the temptation to lock down the economy, deepen the implementation of its recovery and sustainability plans and upscale support to the manufacturing sector to enable it continue to play its conventional role of wealth and employment generation.
All things being equal, the manufacturing sector has the capacity to lead the pack of economic growth drivers if and only if: access to forex at official rates is greatly improved, there is unfettered synergy between fiscal and monetary policies, manufacturers are allowed to utilize earned forex for the procurement of raw materials, spares and machine that are not available locally without any form of restrictions and there is effective supervision to minimise commercial banks components of the cost of loans.
Others are deliberate efforts on the part of Government to translate the achievements made in ease of doing business to actual reduction in the cost of doing business and a winding down of the aggressive drive for internally generated revenues by the three tiers of government without minding the implications on business growth, sustainability and economic development.
