Dike Onwuamaeze
The Nigeria Employers’ Consultative Association (NECA) has decried the persisting rising inflation rate in the economy, saying it was becoming detrimental to economic activities in the country.
The Director General of NECA, Mr. Adewale-Smatt Oyerinde, stated this in a statement yesterday, titled, “Rising Inflationary Rate: NECA Calls for Drastic Review in Policy Stance.”
Oyerinde, noted that, “an inflation rate as high as 26.84 per cent is very harmful to the economy. There is no doubt that households’ real incomes have been grossly eroded within this period while firms’ working capitals have significantly reduced.
“The high inflation rate has also negatively affected almost all business metrics in terms of capacity utilisation, production, sales, profit, and employment.”
He stated that a moderate inflation rate between 3.0 and 5.0 per cent was healthy to any economy, “but at double digits, it becomes detrimental to economic activities. The average inflation in the economy from July to December 2023 was 26.84 per cent.”
The director general opined that the reason for the persisting high inflation rate in the economy could be explained with the tragic relationship around exchange rate, interest rate and then inflation rate, and the implication on investment.
He said: “Today, the Naira exchange rate stands at N1300/$1 in the parallel market and N878.55/$1 in the I&E window, which feeds into inflation.
“The monetary policy is at 18.75 per cent just to maintain an appreciable real interest rate to drive investment. Again, there is the current monetary tightening by the central bank through the reduction of the volume of money in circulation, which is also driving prices upward.”
Oyerinde stated that, “it is evident, that the rising food cost would further put a strain on household budgets, elevate food insecurity and lower standard of living.
“Thus, immediate action is required to reverse the trend. Effective solutions that support Nigeria’s food security and stability must be developed and implemented.”
To address the high and rising inflation in the economy, he posited that, “it is important that CBN entrenches and sustains productive FX management through adequate intervention in the forex market; the monetary authority should also adjust its current reduction of money in circulation to an optimum quantum that will stabilise the economy; government in broad terms should be proactive in its promises for agricultural production as contained in the 2024 budget.”
He advised that there is also the need for the government to embrace backward integration and resource-based industrialisation to improve food and domestic production of raw materials.
“This will reduce the importation of food-related items and raw-materials items to save up FOREX for the economy.
“Furthermore, the government should ensure that peace is brought back to the nation’s crisis-ridden areas, invest in sustainable agricultural methods, and upgrade infrastructure to increase food production and tame the pace of food price increases,” Oyerinde said.
NECA recalled that the National Bureau of Statistics (NBS) reported acceleration in headline inflation to 28.92 per cent in December 2023. This showed 10.18 percentage points increase from 23.75 per cent in December 2022. It also indicated 0.75 per cent increase when compared with 28.20 per cent recorded in the preceding month. Food inflation contributed the highest to the increase in inflation during the month as it stood at 33.93 per cent.
