Dike Onwuamaeze
The Lagos Chamber of Commerce and Industry (LCCI) and the Manufacturers Association of Nigeria (MAN) have expressed concern over the upward trend in the Consumer Price Index (CPI), which climbed to 16.47 per cent in January 2021, the highest since May 2017.
They noted that the trend could increase unsold stocks of goods, have profound implications for entrepreneurs and the larger investing community and also hamper the capacity of firms to do business profitably and deliver value to their shareholders.
They also stated that the rising inflationary trend was largely driven by the persistent food inflationary pressures, which hit a record high of 20.57 per cent, the highest level since 2009, when the CPI series began.
The Director General of the LCCI, Dr. Muda Yusuf, stated pointedly that higher prices would translate to increased production costs for manufacturing companies, with consequent impact on their bottom-line since it is not in all situations that higher input costs can be transferred to consumers.
Yusuf said that core inflation, which captured prices of non-food commodities and services rose to a three-year high of 11.85 per cent in January 2021, due to price increases in housing, water, electricity, gas, and other fuel component and transportation component, adding that the depreciation of the naira’s exchange rate and the foreign exchange liquidity challenges were major drivers of core inflation pressures.
He observed that rising food prices would constrain most low and middle-income households to spend more on food commodities, with little amount to save and invest, warning that unresolved persistent rise in food prices would worsen Nigeria’s poverty situation and push more Nigerians below the poverty line.
Yusuf said: “Rising domestic prices mean deepening negative real returns on investment securities such as treasury bills, bonds, etc., even as yields on these instruments are unattractive relative to emerging market peers.”
He, however, advised government authorities at national and sub-national levels to take measures to ease logistics costs in the economy and also address security concerns in the country, due to its scale of importance as far as food production is concerned in Nigeria.
He emphasised the need to stabilise the foreign exchange market in order to reduce liquidity concerns and associated uncertainties and disruptions in the economy.
On its part, MAN, stated that the rising and high inflation rate in the country has compounded the travails of the manufacturing sector.
It said its members have been reeling under the combined effects of COVID-19 pandemic, deteriorating infrastructure, high regulatory compliance cost and tax obligations since the past four quarters.
The Director General of the MAN, Mr. Segun Ajayi-Kadir, said the, increase in inflation was a threat to the envisaged economic recovery and the growth of the industrial sector.
“There is also the rise in food inflation which will compound the high cost of living and the disposable income of the average Nigerian. The resulting weak consumer spending will worsen the high stock of unplanned inventory that the manufacturing sector is confronted with,” he added.
Ajayi-Kadir advised the government to implement a number of measures so that its efforts to speedily revive the economy would bear desired results.
He said the government should intensify efforts at stabilising the consumer price level through growth in agricultural output and diversification of the Nigerian economy in other to guarantee stable prices for agricultural and manufactured goods.
“Also, there are quite a number of moribund industries in the country that should be resuscitated to boost output and thereby reduce prices.
“Government should also partner with the MAN to accelerate the success in the resource based industrialisation initiative of the association,” he said.
The director general of MAN also claimed that it was evident that there was a strong relationship between manufacturing sector growth and inflation rate, just like exchange and interest rates.
“Therefore, for this moment and in the immediate future, government should assist manufacturing productivity with credit at competitive prices. This could be in the form of concessions and enhancing existing special credit windows or creating additional ones for this important sector of the Nigerian economy.
“Deliberate policy to stimulate domestic production and thereby increase domestic as well as foreign demands for goods would, in the long run, lower inflation and enhance exchange rate appreciations,” Ajayi-Kadir said.
