CPPE gives recipe for tackling inflation in 2022

The Centre for the Promotion of Private Enterprise (CPPE), a non-governmental advocacy group, has highlighted steps Nigeria could take in order to tackle inflation in the new year.

It said the country needs to address the key drivers of inflation in 2022 as follows: boost productivity in the economy to drive output growth; stem the depreciation of the Naira exchange rate; address the illiquidity in the foreign exchange market; minimise the monetisation of fiscal deficit.

At a recent press conference held in Lagos, the Chief Executive Officer (CEO) CPPE, Dr Muda Yusuf, said the CBN financing of deficit should be strictly limited to statutory threshold spelt out in the CBN Act.

He listed other steps to tame inflation to include government seeking creative ways of addressing insecurity in order to pave the way for farmers to return to their farms.

“We need to address the cost of logistics. We need to address the ease of cargo clearing at the port. We need to address climate change concerns. We need to review our trade policy to bring down the cost of some intermediate products for manufacturers,” Yusuf stated.

As at January, 2021, headline inflation was 16.47 per cent and rose to a peak of 18.17 per cent in March and decelerated incrementally to 15.40 per cent  in November 2021. However, headline inflation has been on the increase on a month-on-month basis from January to date, albeit at a reducing rate.

Meanwhile, food inflation has been consistently higher than headline inflation and core inflation for most part of the year.

According to him, inflationary pressure remains a major cause for worry both for businesses and households as it remains elevated.

He said inflation has been fuelled by structural constraints which inhibited productivity in the economy. This includes challenges of infrastructure, especially power, transportation, logistics, among others.

The growing insecurity which is affecting agricultural output in practically all parts of the country has also helped in fuelling inflation. Agricultural activities have been made difficult and almost impossible by the growing insecurity in many parts of the country.

Other causes are climate change which includes desertification and flooding which has also taken its toll on agricultural outputs; low productivity in agriculture resulting from low technological application and low mechanisation of agriculture. Most farming activities are still being done using the traditional methods of hoes and cutlasses; monetisation of fiscal deficit which has been creating high-powered money in the economy.

“As at the last count, Central Banks exposure to the Federal Government through Ways and Means has been reported to be currently in excess of N10 trillion,” he observed.

According to him, sharp depreciation of the Naira exchange rate leading to high cost of raw materials, inputs, equipment and some imported finished goods also leads to inflationary pressures. This has very serious implications for cost and for the welfare of the people during the year.

All these, Yusuf said, aggravate poverty as access to food becomes difficult, increasing risk of malnutrition which has a negative impact on human capital development.

Inflation increases social tension and fuels criminality and also leads to weak purchasing power, low sales and low profit margin for businesses, low-capacity utilisation, high production and operating cost, and high risk of increased business mortality.

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