Economic Recession: CBN Cut The High Interest Rate Now

The Manufacturers Association of Nigeria, the Lagos Chamber of Commerce and Industry, the Abuja Chamber of Commerce and Industry and other organised private sectors on Thursday called on the Federal Government to drastically slash interest rate in order to stimulate economic recovery.


National Bureau of Statistics had released the Gross Domestic Product figures for the second quarter of 2016, whose growth rate slid from -0.36 per cent in the first quarter to -2.06 per cent.

Professional bodies such as the
Chartered Institute of Finance and Control and Institute of Fiscal Studies of Nigeria and renowned economists including the Chief Executive Officer, Financial Derivatives Limited, Bismarck Rewane, advised the government to urgently review its policies and spend more to atttract both local and foreign investors to invest in the economy.

It also released the capital importation report for the second quarter, the unemployment statistics report, the inflation report for the month of July and the labour productivity report for the month of July, all of which painted a negative picture of the Nigerian economy with inflation rising as high as 17.1 per cent from 16.5 per cent, unemployment rate increasing to 13.3 per cent from 12.1 per cent and investment inflows dropping to its lowest levels at $647.1m from $710m.

But speaking to Punch in a telephone interview on Thursday, the President of MAN, Dr Frank Jacob, said the interest rate should be reduced from over 22 per cent to five per cent.

This, he added, would enable manufacturers to borrow for productive purposes.

He said, “Some of the requests that we’ve been making from the government should be looked into. To reflate this economy, they need to reduce the interest rate on loans to five per cent.

“They can also create a special window for manufacturers to source foreign exchange and make it readily available for them as and when they are needed. And of course, the issue of infrastructure should be addressed, especially power and road.”

Reacting, Director-General, Nigeria Employers’ Consultative Association, Mr. Olusegun Oshinowo, said most nations that had been in recession embarked on prudent spending as a way out.

He said, “We have to be able to identify critical sectors of the economy that have impact on other sectors, such as infrastructure which is about road, rail, air and sea transportation. This sector makes for easy movement of goods and services from one location to the other and should be given a lot of attention by the government.

“The government should also settle domestic debts. People who have worked for government should be paid. The focus should also be on social infrastructure with initiatives like the National Health Insurance Scheme and others being empowered to promote health care in the nation.”

The Director-General, LCCI, Mr. Muda Yusuf, said what was important was to inspire the confidence of investors and called on more investment in infrastructure, adding that there was a need to fast-track the implementation of the 2016 budget so that funds could be released into the system for infrastructure development.

Another solution, according to the LCCI DG, was on the trade policies and the various tariffs, which he said government needed to review downwards to drive down costs in the manufacturing sector.

“The rising inflation is cost-driven inflation owing to duties paid by manufacturers who import raw and packaging materials. The government should review the shipping charges and charges imposed by terminal operators so that the cost of manufacturing can go down.”

The President, Nigeria Employers’ Consultative Association, Larry Ettah warned that the imposition of excessive taxes and levies on businesses is not the best solution to recession.

Rather, he said the role of government regulatory agencies should be to make business environment conducive for organisations to thrive and create jobs.