Nigeria's real sector faces higher borrowing cost

The recent rate hike by the monetary policy committee of the Central Bank of Nigeria has sent shockwaves through the real sector of the economy, causing a ripple effect on access to credit, cost of capital for firms, and even the cost of debt service by the government and asset quality of banks. Sam Chidoka, the Chief Executive Officer of Kairos Capital, discussed the implications of this move and the need for a more balanced approach to economic management. The aggressive rate hike of 400 basis points coupled with adjustments to the Cash Reserve Ratio and the asymmetric corridor has raised concerns about the impact on businesses in Nigeria. Chidoka emphasized the importance of considering both fiscal and monetary policies in tandem to achieve sustainable economic growth. While acknowledging the central bank's efforts to curb inflation, he also highlighted the unintended consequences on the real sector. As borrowing costs increase, businesses are likely to pass on these higher costs to consumers, leading to a potential decline in disposable income and overall productivity. The need for a coordinated approach between fiscal and monetary authorities was underscored as essential for driving economic recovery and reducing the reliance on monetary policy alone. Despite the challenges posed by the recent rate hike, Chidoka remains hopeful that a more balanced strategy can help steer Nigeria's economy towards a path of sustainable growth. He urged policymakers to consider the broader implications of their decisions on various sectors of the economy to ensure a more inclusive and robust recovery. The delicate balance between managing inflation, exchange rates, and economic growth requires a nuanced approach that takes into account the multifaceted nature of Nigeria's economic challenges. Moving forward, a harmonized policy framework that integrates both fiscal and monetary tools will be crucial in navigating the complexities of the current economic landscape and fostering long-term growth and stability.