The chief executive officer (CEO) of the Centre For The Promotion Of Private Enterprise(CPPE), Dr. Muda Yusuf, has decried increasing decline in manufacturing capacity utilisation, just as he urged government to urgently tame inflation by fixing supply-side constraints in the economy.
Reviewing the November inflation figures, Yusuf who was the former director general of the Lagos Chamber of Commerce and Industry(LCCI), challenged the authorities to tackle
production and productivity constraints, fixing the dysfunctional forex policy, and reducing liquidity injection through ways and means funding of fiscal deficit.
He observed that, like in many other parts of the world, the phenomenon of mounting inflationary pressures in the Nigerian economy is yet to abate and unfortunately remains a major cause for concern for stakeholders in the Nigerian economy.
According to the National Bureau of Statistics [NBS], headline inflation accelerated to 21.47 per cent in November as against 21.09 per cent in October.
On a month-on-month basis, there it increased to 1.39 per cent in November as against 1.24 per cent in October 2022.
According to the data, food inflation rose to 24.13 per cent from 23.72 per cent in October and on a month-on-month basis, food inflation grew by 1.4 per cent compared to 1.23 per cent in October while core inflation similarly spiraled to 18.24 per cent from 17.76 per cent in October.
He noted that, “Over the last one year, the Nigeria inflation story has been a depressing one as reflected in the dynamics of all key price metrics.
“The key inflation drivers have not changed over the last few years. They include the following: the depreciating exchange rate, rising transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, climate change, insecurity ravaging farming communities and structural constraints to economic activities.”
Yusuf stated that fiscal deficit financing by the Central Bank of Nigeria (CBN) is also a significant factor fueling inflation through high liquidity injection into the economy, while tapering of monetary easing in the advanced economies is also driving imported inflation and the depreciation in the exchange rate.
He listed consequences of soaring inflation to include: erosion of purchasing power of citizens as real incomes collapse, mounting poverty, escalation of production costs, which negatively impacts profitability, shrinking shareholder value in many businesses and waning of investors’ confidence.
Yusuf, therefore, advised CBN to resist the temptation of further monetary policy tightening while deployment of monetary tightening tools should be put on pause.
“The Nigerian economy is not a credit driven economy which is why the tightening outcomes has been inconsequential as a tool to tame inflation. As at October 2022, credit to the private sector as a percentage of GDP was 22.7 per cent in Nigeria.
“The percentages for other countries in 2020 according to world bank were 32 per cent in Kenya; 96 per cent in Morocco; 193 per cent in Japan; 143 per cent in UK; 216 per cent in the United States; and 39 per cent was average for sub-Sahara Africa,” he pointed out.
