- Treasurers have called on the government to adopt alternatives to tackling inflation
- They said government’s resort to interest rate hikes is are discourage productive investments
- Their calls re-echo the stance of analysts and economists on interest rate hikes
Treasurers under the aegis of the Association of Corporate Treasurers of Nigeria are calling on the Federal Government to adopt alternative strategies to tackling inflation other than further hike of the interest rate.
President of ACTN, Adeyinka Ogunnubi, stated this at a recent media launch for the 2024 Treasury360 Conference and Exhibition, slated for November 14, with the theme, ‘Policy Implications and Building Sustainable Treasury Strategies: Nigerian Perspectives on Tackling Inflation and Interest Rate Uncertainty.’
According to the association, speakers at the conference will include the Central Bank of Nigeria governor, Olayemi Cardoso; Deputy Chief Executive of the Association of Corporate Treasurers in the United Kingdom, Janet Legge and the Director of the Centre for Promotion of Private Enterprise (CPPE), Dr Muda Yusuf.
Ogunnubi highlighted the impact of Nigeria’s inflationary pressures on corporate treasurers and the broader economy, noting the inflationary pressures had forced treasurers to adopt more resilient strategies as well as impacting businesses in the country.
He said, “The government has to look beyond just regulating interest rates. With food inflation nearing 40 per cent, there are low-hanging fruits the government can address to ease the burden on Nigerians without exacerbating borrowing costs.”
The ACTN president said such alternatives as improving food transportation, supply chains and storage would help in reducing food prices, which is one of the major drivers of headline inflation.
Ogunnubi questioned why locally grown food items like beans should be affected by foreign exchange rates and called on stakeholders to address “price gouging” as such discrepancies are driving up costs.
High interest rates are discouraging productive investments
On the impact of high interest rate, another member of the ACTN board, Benedict Ologbosera, added that interest rates are discouraging productive investments, especially in agriculture and manufacturing.
Ologbosera revealed that many businesses are downsizing to meet costs even as they insist on immediate payment for goods and services to mitigate exposure to inflation.
He said, “Why would anyone venture into agriculture when they can get up to 30 per cent returns by simply keeping their money in fixed deposits?
“Many businesses are optimising their funds to reduce inflation’s impact, as relying on credit in today’s economy can have adverse effects on cash flow.”
ACTN’s call re-echo analysts’ stance
The call by ACTN is similar to that of analysts and economists who have, at different fora, urged the government and the monetary authorities to adopt other measures of curbing inflation other than resorting to hiking interest rates.
Recall that the TheRadar had reported the various strategies that the Central Bank of Nigeria can adopt to curb inflation beyond what some tag ‘textbook economics.’
The apex bank, in its efforts to tame inflation, has continued to increase the interest rate, which went up by 50 basis points (bps) to 27.25 per cent after its 297th meeting held September 23 and 24 from 26.75 per cent in July.
Despite the CBN monetary tightening stance, the inflation rate soared to a new 28-year all-time high of 34.19 per cent in June. It, however, tapered in July after 19 months, declining to 33.40 per cent. The rate declined further for the second consecutive month in August to 32.15 per cent before increasing to 32.70 per cent in September 2024.
CBN will adopt ‘more measured’ approach towards lowering interest rate – Cardoso
Meanwhile, TheRadar reported that the governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, says the bank is cautious about lowering the interest rate due to the persistently high inflation rate in Nigeria.
Cardoso said though central banks around the world are lowering interest rates, the CBN’s approach is “a lot more measured” and considering the Nigerian context to avoid the inflation rate getting out of control.
