The Manufacturers Association of Nigeria (MAN), said revenue loss from the oil and gas sector which has remained the major driver of the economy over the years, is driving national economy to the brink.
MAN said, those policies and obvious lack of commitment to implement key policy initiatives in the sector have triggered multiple backlash in the economy.
The association’s director general, Segun Ajayi-Kadiri, while responding to the rising inflation in the country said, the nationwide fuel scarcity witnessed in June is largely responsible for the rise in inflation.
According to him, the fuel scarcity necessitated further hike in energy prices, particularly prices of diesel, aviation fuel and petrol, which all had trickled down effects on the cost of food, manufactured products, other commodities, transportation and accommodation nationwide.
Most notably, the price of diesel has spiked by about 230 percent in the last one year, he said.
According to National Bureau of Statistics (NBS), headline inflation for June 2022 stood at 18.6 per cent indicating a further rise of 0.85 per cent point from 17.75 recorded in the corresponding period of 2021.
On a month-to-month basis, the NBS, also revealed that the headline inflation rate increased to 1.82 per cent in June 2022, signifying 0.04 percentage point increase above the 1.78 per cent recorded in May 2022.
Food inflation also increased to 2.05 per cent, when compared to 2.01 per cent recorded in May 2022, while core inflation declined from 1.87 in May 2022 to 1.56 in June 2022.
The bureau identified the major contributory factor responsible for the surge in headline inflation to include; increase in prices of gas, liquid fuel, solid fuel, garments, passenger transport by road, cleaning, repair and hire of clothing, and passenger travel by air, meat, bread, cereals, fish, potatoes, oil, fat, wine, yam and other tubers.
In broad terms, inflation rate has assumed an upward swing, which of course, signals worsening economic times ahead.
According to MAN, the report revealed that the 18.6 per cent rate portends a gradual journey towards the 18.72 per cent peak inflation rate recorded in January 2017, which it says is a worrisome acceleration of inflation rate that should be halted, especially giving the fact that socio-political and economic activities that trigger spike in inflation are imminent.
The DG stressed the need to strategically position the oil and gas industry to benefit maximally from future interruptions in global supply that triggers increase in price of crude oil, adding that, “it is appalling that an oil-producing country like Nigeria is at a disadvantage at a time when global oil prices are rising.”
He called on government to accelerate the process of ensuring sustainable local refining of petroleum products by reactivating those currently quiescent, support the coming on stream of Dangote refinery and issue licenses for new refineries.
This, he said, will clearly reduce the pressure of the foreign reserve and mitigate the vulnerability of the economy to the external supply shock that has resulted in energy crisis.
The MAN boss said, it is important for government to strive to always meet the oil production quota set by OPEC, increase oil revenue and reduce budget deficit that has worsened inflation.
In addition, he said, government should introduce favourable investment oriented and security measures that will encourage private investment inflow into the oil and gas industry in order to pave way for the rehabilitation of the traditional full-scale refineries, develop the regulatory framework for the establishment of modular refineries.
He added, “In the midst of rising oil prices, the fiscal authority strategically reduced payment from the Federation Account Allocation Committee (FAAC) in May by about 9.51 percent representing N62.4 billion reduction, which ideally to some extent should have reduced inflationary pressure.
“However, the CBN expansionary policy stance, which influenced the growth in broad money supply by 25.51 percent in the last twelve months fueled inflation.”
He said, Nigeria remains a highly import dependent economy, as such, the exchange rate pass-through effect continues to worsen inflation with the domestic currency depreciating by over 22 per cent within the last twelve months.
“At present, the exchange rate premium has further widened by 194 with the Naira trading at about N610/$ and N415.83 at the parallel and official markets respectively, “ he said.
