Manufacturers said there is an urgent need to tackle the underlying causes of inflation as this will worsen constraints on economic expansion and elevate the unemployment rate within the country.
The director-general of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, stated this in a report titled ‘Increasing Inflation Rate and Its Impact on the Manufacturing Sector’ sent to LEADERSHIP.
According to Ajayi-Kadir, in July 2023, “Nigeria experienced a surge in inflation, with the rate reaching a new 18-year high of 24.08 percent. This marks an increase of 1.29 percent from the previous month’s rate of 22.79 percent, as reported by the National Bureau of Statistics (NBS).
“The rise in inflation was mainly driven by higher prices of food items. Over the course of a year, the inflation rate had risen by 4.44 percentage points, starting from 19.64 percent in July 2022.”
He noted that the continued surge in sub-indices of inflation shows that Nigeria’s inflation is more than transient but structural in nature.
He explained that the continuing inflationary pressure experienced in the country is attributable to the fallout of recent government policies and measures, including the removal of fuel subsidies and the unification of exchange rates. He said concerns about increasing energy costs and widespread insecurity in food-producing regions are exacerbating the inflationary pressures.
He further said, “the ongoing rise in inflation erodes savings and incomes, prompting the CBN to raise the country’s benchmark interest rate to the highest level in nearly twenty years. The CBN increased the monetary policy rate in July.
“The apex bank’s effort was aimed at arresting the soaring inflation and defending the Naira, which has continued to drop in value both in the official and parallel markets. The increase of the MPR by 25 basis points in July brought the interest rate to 18.75 percent. Within a span of one year, the central bank has raised the Monetary Policy Rate (MPR) by 750 basis points from its April 2022 level of 11.5 percent.”
He added that, “addressing inflation is a complex and long-term endeavor that requires a coordinated effort from various stakeholders, including the government, central bank, private sector, and civil society.”
For the country to witness sustained economic growth, MAN recommended a stable exchange rate, which is crucial to controlling inflation. The CBN should implement effective exchange rate policies that prevent sharp depreciation of the currency, which has continued to lead to imported inflation.
Ajayi-Kadir added that, “employment of collaborative fiscal policy measures through budgeting and effective taxation to complement the monetary policy actions taken by the CBN; increased targeted support to the agricultural sector to enhance productivity, reduce reliance on imports, and stabilize food prices; formulation of policies that promote a stable and conducive business environment; communicate effectively with the public and stakeholders about the government’s commitment to controlling inflation; addressing the challenges of insecurity; and implementing structural reforms that enhance transparency, reduce bureaucracy, and improve the ease of doing business.”
