Small Business Owners Predict Rising Unemployment Due to New CBN Interest Rates
Small business owners have expressed disappointment over the recent decision by the Central Bank of Nigeria (CBN) to increase the Monetary Policy Rate (MPR). They fear this move will shrink businesses even more, leading to job losses as companies downsize.
The CBN raised the MPR by 50 basis points, from 26.75% to 27.25%, during a meeting in Abuja, led by CBN governor Mr. Olayemi Cardoso. Out of 12 members of the Monetary Policy Committee (MPC), 11 voted for the rate hike.
The MPR is the benchmark interest rate banks use to charge their customers. At the same time, the Nigerian Bureau of Statistics (NBS) reported a rise in the country’s unemployment rate, which increased by 1.2 percentage points, reaching 5.3% year-on-year. This has raised concerns among small business owners, who believe the new interest rate will make it harder to keep jobs and negatively impact local businesses.
The president of the Association of Small Business Owners of Nigeria (ASBON), Dr. Femi Egbesola, criticized the rate increase, stating that it would worsen the struggles faced by manufacturers and other sectors of the economy. He noted that the already high cost of doing business would rise further, reducing liquidity and profitability. This could lead to more companies failing to repay their loans, making banks hesitant to lend money, especially to the real sector.
As businesses struggle, production will likely slow down, leading to downsizing and fewer investments in human resources. Many businesses might collapse, making it even harder for locally made products to compete, as they will become more expensive.
On a positive note, Mr. Cardoso expressed hope that the Dangote Refinery will ease the demand for foreign exchange (FX) in Nigeria, as a significant portion of the country’s FX is used to import petroleum products. Once the refinery begins exporting, Nigeria’s FX situation could improve significantly.
