*OPS advocates emergency strategies to protect economy, businesses
Members of the Organised Private Sector (OPS) have expressed worries over the growing inflationary trend as evidenced by the Consumer Price Index (CPI) rising in March to 18.17 per cent, the highest since 2017. This is compared to 17.33 per cent the CPI was in previous month.
Reacting to the latest inflation figures released yesterday by the National Bureau of Statistics (NBS), the OPS members said time had come for the federal government to institute emergency strategies to reverse the trend to protect the economy, businesses and individuals from inflationary deleterious effects.
The OPS members, in separate interviews, attributed the high inflationary trend to insecurity, transportation cost, increased energy tariffs and structural bottlenecks that constrained production in the Nigerian economy.
According to the CPI Report for March, which NBS released yesterday, food inflation increased to 22.95 per cent from 21.79 per cent in February.
Core inflation also rose to 12.67 per cent in March from 12.38 per cent in February.
NBS attributed the rise in the food index to increases in prices of bread and cereals, potatoes, yam and other tubers, meat, vegetable, fish, oils, fats and fruits.
Similarly, core inflation was further fuelled by the highest increases recorded in prices of passenger transport by air, medical services, miscellaneous services relating to the dwelling, passenger transport by road, hospital services, passenger transport by road and pharmaceutical products.
Others are uptick in costs of paramedical services, vehicle spare parts, dental services, motor cars, maintenance and repair of personal transport equipment, hairdressing salons and personal grooming establishment.
The urban inflation rate increased to 18.76 per cent (year-on-year) in March from 17.92 per cent recorded in February while the rural inflation increased to 17.60 per cent from 16.77 per cent in the preceding month.
On a month-on-month basis, the urban index rose by 1.60 per cent in March, up by 0.02 per cent compared to the rate recorded in February. The rural index also rose by 1.52 per cent in March 2021, up by 0.02, compared to the 1.50 per cent recorded in February.
The Director-General of the Nigeria Employers’ Consultative Association (NECA), Mr. Timothy Olawale, urged the federal government to step up efforts at combating insecurity.
He said: “It is high time the presidency declared a state of emergency on security in the country in order to reverse the trend before it escalated beyond the reach of managers of the economy.
“The security challenges have disrupted the intervention programmes of the Central Bank of Nigeria (CBN), as farmers in the northern region were prevented from engaging in any agricultural ventures in most part of last year.
“However, the security trend is still ongoing during the start of another planting season as well as degenerating downward to the southern part of the country. It is imperative for the federal and state governments, in collaboration with other security apparatus in the country, to address the growing menace and save the Nigerian economy from going the ways of Zimbabwe and Venezuela.
“The current situation suffices to contest the positive GDP growth recorded in the Q4, 2020 report, as most macroeconomic variables are all in the negatives.”
He added that the ripple effect of the skyrocketing inflationary rate on the economy, businesses and individuals are enormous, especially the rising food price inflation.
According to him, the rising food inflation will decrease individual and household’s disposable incomes and force a reduced consumption and saving patterns in the economy.
He said: “With less consumption trend, enterprise goods and services patronage will be dwindled and same goes to taxes and levies remittances, which form the bulk of government revenues apart from oil rents.”
Olawale also called for the provision of balancing fiscal measures that could reduce the burden of inflation on Nigerian consumers.
Olawale’s counterpart in the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, described the current inflationary trend as a troubling phenomenon, especially the food inflation that accelerated to 23 per cent.
Yusuf identified currency depreciation, acute illiquidity in the foreign exchange market, rising transportation costs, agricultural output disruptions caused by growing insecurity, logistics challenges, hike in energy prices, climate change and structural bottlenecks to production as the key drivers of inflation.
He said: “The solution, therefore, would have to be situated in the context of these causal factors. Rising inflationary pressure weakens purchasing power of citizens as real incomes collapse; it accentuates pressure on production costs, negatively impacts profitability and undermines investors’ confidence.
“It is not in all cases that high production and operating costs can be passed on to the consumers. The implication is that producers are also taking a hit. This is more severe where a product or service is faced with high demand elasticity. These are products that consumers can readily do without.”
Yusuf also advised the government to introduce interventions to address the challenges bedeviling the supply side of the economy.
“There is also a need to worry about the growing fiscal deficit, especially the CBN financing of the deficit. It is characterised as inflation tax by a school of thought in economic literature,” he said.