An Economist and the Chief Executive Officer of the Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, has described the steady but marginal decrease in headline inflation over the past few months as a noteworthy development.
Yusuf said that according to the National Bureau of Statistics (NBS), “headline inflation decelerated by 0.38 per cent from 17.01 per cent in August to 16.63 per cent in September.
“Meanwhile food inflation, which is the biggest worry for the poor decelerated from 20.3 per cent in August to 19.57 per cent in September. But on a month-on-month basis, there was an increase of 1.26 per cent between August and September.”
He, however, noted that the core inflation, which related largely to non-agricultural products, maintained an upward trend and accelerated by 13.74 per cent in September as against 13.41 per cent in August, an increase of 1.24 per cent. This was largely a reflection of the impact of the further depreciation in the naira exchange rate.
Yusuf pointed out that high inflationary pressure has remained a major concern to stakeholders in the Nigerian economy in spite of the incremental deceleration being witnessed in inflation over the past couple of months.
He said that some of its implications include escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, the decline in turnover and weak manufacturing capacity utilisation,
“High food prices which impact adversely on citizens welfare and aggravates poverty while weak purchasing power which poses a significant risk to business sustainability. Just as price volatility which undermines investors’ confidence,” he said.
Yusuf attributed inflationary pressures to exchange rate depreciation, which has a significant impact on headline inflation, especially the core sub-index.
“Liquidity challenges in the foreign exchange market impacting adversely on manufacturing output,” he said, adding that security concerns affecting agricultural output, climate change, high energy cost, structural constraints affecting productivity in the agricultural value chain, and high transportation costs were sources of inflation.