By Merit Ibe
The Centre for Promotion of Private Enterprises (CPPE) has recommended reform of the foreign exchange market to stabilise the exchange rate and reduce volatility.
The centre made the assertion following the marginal spike in the December 2021 headline inflation from 15.4 per cent in November to 15.63 per cent in December 2021.
Dr Muda Yusuf, its CEO, maintained that the surge in demand during the December festivities must have played a role in the marginal spike and reversal of the deceleration trend in headline inflation.
He noted that inflationary pressures remain a significant macroeconomic risk in the Nigerian economy, adding that it is a major concern to both businesses and citizens.
To further tame the pressure, Yusuf advised that forex liquidity issues be addressed through appropriate policy measures; the security concerns causing disruption to agricultural activities should be addressed:
According to the centre, the following should be tackled expressly to subdue the pressure of headline inflation: Productivity issues in the real sector of the economy; challenge of high transportation cost; Reduce fiscal deficit financing by the CBN to minimize incidence of high-powered money in the economy; Manage climate change consequences to reduce flooding and desertification; Ensure the restoration of normalcy and good order at the nations ports to reduce transaction costs; 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.
The CPPE boss said: “Meanwhile, food inflation, which is the biggest worry for the poor, rose from 17.21 per cent in November to 17.37 per cent in December. But on a month-on-month basis, there was an increase of 2.19 per cent.
The Core inflation, which relates to non-agricultural products, maintained an upward trend. It increased from 13.85 per cent in November to 13.87 per cent in December. This was largely a reflection of the impact of currency depreciation and the liquidity challenges in the forex market.”
He noted that although the economy witnessed an incremental deceleration in inflation over the past eight months before the reversal in December, high inflationary pressures remain a major concern to stakeholders in the Nigeria economy with the following implications; Escalation of production and operating costs for businesses, leading to erosion of profit margins, drop in sales, decline in turnover and weak manufacturing capacity utilization,
“High food prices which impacts adversely on citizens welfare and aggravates poverty.
“Weak purchasing power which poses significant risk to business sustainability.
“Price volatility which undermines investors’ confidence.”