Concerted policies on foreign exchange (forex), power and transportation would tame inflation and engender a stable economy, experts said yesterday.
But they said the spiraling inflation may take more time to abate.
The National Bureau of Statistics (NBS) yesterday released its latest inflation figure, showing that headline inflation rate rose by 98 basis points from 28.92 per cent last December to 29.90 per cent in January 2024.
A breakdown showed that inflationary pressures remained mainly around food, as rising production cost, transport fares and insecurity concerns.
All, combined together, continued to fuel food shortage and scarcity.
Food inflation stood at 35.4 per cent in January 2024 as against 33.9 per cent in December 2023. The rise in food inflation was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, oil and fat, fish, meat, fruit, coffee, tea, and cocoa.
The Federal Government upped its policy actions aimed at addressing insecurity and food shortage yesterday after President Bola Ahmed Tinubu met with governors and agreed on key initiatives aimed at tackling the menace of insecurity and food scarcity.
The key agreements included reinforcement of security forces and consideration for the establishment of state police, collaborative actions to improve food production and enforcement actions against hoarding and profiteering.
Experts, who spoke against the background of the latest inflation figure, agreed that the country needs to further stimulate implementation of policy actions on forex, power, security and logistics in order to create a stable pricing regime.
Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the persistent inflationary pressures in the Nigerian economy have continued to be a troubling phenomenon, especially because of the acceleration effect on poverty and deterioration of citizens’ welfare.
He said the inflationary pressures called for more concerted actions by the government as economic growth may remain subdued while the risk of stagflation heightens, unless more preventive actions are taken.
“It is very difficult to tame inflation if we do not fix power, logistics and forex issues. Regrettably, there are no quick fixes in these areas. But it is important to prioritise these issues and ensure stability and recovery,” Yusuf, a former Director-General of Lagos Chamber of Commerce and Industry (LCCI) said.
According to him, the major inflation drivers are not receding, if anything, they have become even more intense, including the depreciating exchange rate, surging transportation costs, logistics challenges, forex market illiquidity, astronomical hike in diesel cost, insecurity in farming communities and structural bottlenecks to production.
According to him, the weakening of the naira against the currency of neighbouring countries has also continued to incentivise the outflow of agricultural products to these countries, thus complicating the supply side challenges, especially of food crops.
Yusuf said: “Elevated inflationary pressures also aggravate pressure on production costs, weakens profitability, erodes shareholders value and dampens investors’ confidence. Only very few producers or service providers can transfer cost increases to their consumers. The implication is that manufacturers and other investors are currently under tremendous pressure.”
He advised the government that in order to tackle inflation, there is need for urgent intervention to address the challenges bedevelling production, productivity, forex and insecurity in the economy.
“The real sector of the economy needs to be incentivised to ensure moderation of production costs. The government needs to review its tariff policies by granting concessionary import duty on intermediate products for agro allied industries and other industrialists. The same is true of investors in logistics sector,” Yusuf said.
As further incentive, Yusuf suggested that the exchange rate benchmark for the computation of import duty should be pegged at N1, 000 per dollar in order to reduce the pressure of escalating costs of cargo clearing and minimise uncertainty in the international trade processes.
“The policy choice of complete floating of the naira requires a rethink in the light of the current inflationary outcomes, volatility and market imperfections,” Yusuf said.
Experts at CardinalStone said food pressures may remain in the short term while noting the efforts of government to establish a National Commodity Board, tasked with the responsibility of regulating food prices and managing strategic food reserves.
CardinalStone attributed the increase in core inflation, which rose by 53 basis points, to the sustained currency pressures, given that the naira at the official market has depreciated by about 39.7 per cent so far this year.
Some experts at Arthur Steven Asset Management stated that the rising inflation has raised strong expectation of continuous monetary policy tightening, noting that inflation has continued on “unhindered upward trend”.
Futureview Group noted that the inflation report highlighted the “increasing financial strain within the food industry, shaping the broader inflationary environment and directly affecting the cost of living for households across the country”.
Cordros Group noted that core inflation, which rose from 23.06 per cent in December 2023 to 23.59 per cent in January 2024, was driven largely by increases recorded in prices of passenger transport by road, medical services, actual and imputed rentals for housing, pharmaceutical products, accommodation service, and passenger transport by air.
