Former Director General of the Lagos Chamber of Commerce and Industry (LCCI) Dr. Muda Yusuf, has canvassed sundry micro and macroeconomic policy measures the federal government should urgently adopt to improve the nation’s economic climate with the attendant positive implications for real sector’s improved contributions to the nation’s Gross Domestic Product (GDP) growth.
Yusuf, in a statement issued at the weekend which particularly focused on the inflation trends in the economy over the past few months, noted that high inflationary pressures remained a major concern to stakeholders in the economy.
According to him, even though the economy witnessed a sustained deceleration in inflation over the last couple of months, the inflation trend still comes with certain implications, especially as it will lead to escalation of production and operating costs for businesses.
The former LCCI boss pointed out that whenthis happens, it will lead to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilization for businesses in the country.
In addition, Yusuf, who is also the Chief Executive Officer, Centre For The Promotion Of Private Enterprise (CPPE), said the trend would lead to high food prices which impact adversely on citizens’ welfare, aggravate poverty, and weaken purchasing power which pose significant risk to business sustainability as well as price volatility which undermines investors confidence.
He identified the major inflation drivers and cost in the economy as including, exchange rate depreciation and its significant impact on headline inflation, especially the core sub index; liquidity challenges in the forex market which is also impacting adversely on manufacturing output; security concerns which have affected agricultural output; climate change that has also effected agricultural production as there are increasing cases of flooding and desertification in many parts of the country..
The seasoned economist also pointed out that structural constraints had impacted productivity in the agricultural value chain while high transportation costs had increased distribution costs across the country, thereby leading to huge differential between farm gate prices and market prices, he said.
In addition, Yusuf lamented that monetization of fiscal deficit (CBN financing of deficit) is highly inflationary because of the liquidity injection effects on the economy, adding that this becomes worrisome when statutory thresholds are exceeded.
He also that high transactions costs at the nation’s ports increases production and operating costs of businesses as well as high energy cost high import duty on intermediate goods and raw materials.
To reverse the current inflationary pressure, the CPPE chief advised government to reform the foreign exchange market to stabilize the exchange rate and reduce volatility and address forex liquidity issues through appropriate policy measures.
This is even as he also urged government to seriously address the security concerns causing disruption to agricultural activities, including high transportation cost, reduce fiscal deficit monetization to minimize incidence of high-powered money in the economy.
Similarly, he maintained that government should also focus efforts on management of climate change consequences to reduce flooding and desertification, ensure the restoration of normalcy and good order at the nation’s ports to reduce transaction costs.
Yusuf also canvassed the need to reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of the sharp depreciation in the exchange rate, address concerns around high energy cost and create an investment friendly tax environment.
He explained that the steady but marginal deceleration in headline inflation over the past few months was noteworthy, noting, however, that inflationary pressures remain a key concern in the Nigerian economy, both for businesses and the citizens.
Last Friday, the National Bureau of Statistics (NBS) reported that the nation’s headline inflation decelerated by 0.38% in September from 17.01% in August to 16.63%. However, on a month-on-month basis, there was a slight surge of 1.15% between August and September.
The Bureau also reported that food inflation decelerated by 0.73% from 20.3% in August to 19.57% in September, adding that on a month-on-month basis, the food inflation recorded an increase of 1.26%.
The Core inflation, which relates largely to non-agricultural products, maintained an upward trend, rising by 13.74% year-on-year in September compared to the 13.41% in August.
