Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf has decried the mounting inflationary pressure as a major cause for concern on the outlook of the Nigerian economy.
The National Bureau of Statistics (NBS) in its September 2022 report indicated that the nation’s inflation rose to 20.77 per cent during the month. It was 4.14 per cent points higher than the rate recorded in September 2021, that was 16.63 per cent. Prices of goods have continued to go up for instance a bag of local rice that was N30,000 in August 2022 rose to N35,000 while an average tuber of yam that cost N500 had increased to between N800 and N1, 000. Also, a kilogramme of Semovita that was N900 last month rose to N1,300.
Yusuf said key inflation drivers have not abated, if anything, they have become even more intense.
On the factors affecting the headline inflation, he said it included but not restricted to the depreciating exchange rate, rising, transportation costs, logistics challenges and forex market. Others were illiquidity, hike in diesel cost, climate change, insecurity in many farming communities and structural bottlenecks to production which are basically supply side issues.
In an interview with The Nation, Yusuf added that the accelerated growth in fiscal deficit financing by the CBN in the threshold of N20 trillion is boosting liquidity in the economy and have a profound effect of fueling inflation.
“The CBN financing of fiscal deficit has been elevated to disturbing levels with huge implications for money supply growth and consequent effect on inflation. Elevated inflationary pressures weaken purchasing power of citizens as real incomes are eroded, increases poverty incidence. It aggravates pressure on production costs, negatively impacts profitability, erodes shareholders value and undermines investors’ confidence,” Yusuf said.
He stressed that in most cases, increases in production costs cannot be transferred to consumers. The implication according to him is that manufacturers are also taking a hit; this is more pronounced where the demand for the product is elastic.
He advised that tackling inflation requires urgent government intervention to address the challenges bedevilling the supply side of the economy and the moderation of fiscal deficit monetization.
He said this will give producers some succour with the government tweaking the tariff policies by granting concessionary import duty on intermediate products for industrialists.
“It is imperative at this point to review the import policy on some food items to provide some succour to citizens in the face of excruciating poverty. The CBN also needs to adopt a flexible exchange rate policy to address the problem of acute forex scarcity in the economy,” Yusuf said.
As Published on The Nation Online