Industry stakeholders are worried over inflationary pressures in the economy as the current high inflation rate is causing disruption to manufacturing and agricultural activities.
According to the recently released data by the National Bureau of Statistics (NBS), headline inflation rose by 89 basis points to 18.60 per cent year-on-year in June, 2022, the highest print since January 2017 (18.72 per cent year-on-year).
The increased consumer prices synchronised neatly with the impact of high food demand-supply gap as planting season was underway, PMS shortages, elevated diesel and gas prices, and lingering currency pressures, amid the unfavourable base effects from the prior year.
The organised private sector (OPS) noted that, in curbing inflationary pressures, challenges like insecurity, forex scarcity, and uncertainties from the inconsistent policy environment must be tackled.
President, Lagos Chamber Of Commerce & Industry (LCCI), Dr. Michael Olawale-Cole, said: “the food inflation in the past months easily confirms that food prices explain a high impact on the headline inflation. Cost of production due to rising fuel prices, forex scarcity, and supply chain disruptions may remain in the short term if these factors are not cushioned.”
He noted “the position of the Chamber was confirmed by the latest Nigeria Development Update by the World Bank which highlighted the vulnerability of the Nigerian economy due to rising inflation pressures, forex illiquidity crisis, worsening insecurity, poor power supply, and weak infrastructure.
“We reiterate our position on the rising inflation that rates hike alone will not tame the rising inflation. The government must invest more in boosting supply and cushioning the cost of production. Also, the burdening impact of fuel costs on businesses will remain as long as we keep importing refined fuels for our teeming population and neighboring countries. We posit that only the removal of fuel subsidies and the boosting of local refining will resolve the worsening crises in fuel supply and its multiplier effects on production and prices.”
The chief executive officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, lamented the high inflationary pressures, which has continued to be a major worry to stakeholders in the Nigeria economy, saying this has led to escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilization; high food prices which impacts adversely on citizens welfare and aggravates poverty; weak purchasing power which has implications for aggregate demand; and price volatility which undermines investors’ confidence.
According to Yusuf, to curb the current inflationary pressure, government need to address the security concerns causing disruption to agricultural activities; reform the foreign exchangemarket to stabilize the exchange rate, reduce volatility and stimulate forex inflows; address forex liquidity issues through appropriate policy measures; address the challenge of high transportation and logistics cost, reduce fiscal deficit monetization to minimize incidence of high-powered money in the economy; address concerns around high energy cost; create an investment friendly tax environment; among others.
The director-general of Manufacturers Association of Nigeria (MAN), Mr Segun Ajayi-Kadir described the high inflation rate as a threat to the envisaged manufacturing and industrial sectors recovery and the growth.
Ajayi-Kadir noted that the resulting weak consumer spending would worsen the high stock of unplanned inventory that the manufacturing sector was already confronted with.
“The manufacturing sector has been struggling, particularly in the past four quarters, from deteriorating infrastructure, high regulatory compliance cost and tax obligations.
“So, rising and high inflation, perennially high interest rates and scarce/high rate of forex has compounded the downturn in the sector in terms of the envisaged recovery.”
The MAN DG advised government to intensify efforts at stabilising the consumer price level through growth in agricultural output and diversification of the Nigerian economy in order to guarantee stable prices in both agricultural and manufactured goods.
Ajayi-Kadir also pushed for the resuscitation of moribund industries in the country to boost output, thereby reducing prices, saying “Government should also partner with the Manufacturers Association of Nigeria to accelerate the success in the resource based industrialisation initiative of the Association.”
