Following the National Bureau of Statistics (NBS)’s announcement that the country’s consumer price index (CPI) which reported inflation increased by 14.23 per cent (year-on-year) in October, stakeholders have lamented that the rising inflation rate is worsening the running of businesses, manufacturing and furthering fragility in the country’s economy post COVID-19.
Purchasing power of many Nigerian households, which has been under pressure due to the impact of the pandemic, has weakened more as a result of continued rise in food prices.
Figures released by the NBS has surpassed prediction by the CBN that inflation would likely rise to 14.15 per cent at the end of December. Due to Federal Government’s increase in cost of fuel, electricity tariff and foreign exchange market instability, which have invariably affected cost of goods, an average Nigerian is currently facing difficulty in affording consumer goods.
Many have also attributed the directive of CBN to halt sales of forex to food importers, as part of reasons for the rise in prices of food stuff, causing food related inflation.
According to the Lagos Chamber of Commerce and Industry (LCCI), data on trends in per capita income, poverty, unemployment and food inflation, affirm the position of worsening state of affairs in the country and for consumers.
Analysts also believe higher food prices have continued to be the primary driver of inflation as impacts of border closure, banditry, supply chain disruptions, forex instability, increase in electricity tariff and hike in fuel price worsened the effects.
Notably, transport inflation also accelerated faster than other core sub-components following increases in fuel prices.
Many households are depressed over the low purchasing power which has impacted on their standard of living.
Worse still, many firms can no longer meet salary obligations to their workforce since the pandemic and the #ENDSARS protests have disrupted marketing feasibility and revenue projection.
The rising inflation is raising the level of poverty in the country , which the NBS has confirmed that 40 per cent of Nigerians (or 82.9 million people) are poor.
Manufacturing firms have expressed concerns considering that prices further spiked by challenges in supply chains occasioned by the inability to access forex for the importation of critical raw materials and high cost of energy, which have affected its production capacity. The manufacturing sector expects that the trend is expected to continue till the year end, except macro-economic changes are implemented.
The CBN Governor, Godwin Emefiele, had said inflationary pressure might continue till the end of this year, citing disruptions to global and domestic supply chains as a result of COVID-19.
Other factors that raised inflation, according to him, included exchange rate adjustment, and seasonal food supply shocks due to the onset of the farming season and other structural bottlenecks.
He noted that the chief reason for the inflation is because our economy still remains significantly import dependent and so no doubt, this will further accelerate the level of inflation in the country.
The Acting Director-General, Manufacturers Association of Nigeria (MAN), Ambrose Oruche, and the Director-General, Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf, affirmed that the rising inflation has serious implications for businesses regarding production cost, investment real return rate, and overall economic performance in the country.
According to Oruche, the NBS’ new report on inflation will have adverse effects on manufacturing production of local manufacturers.
He noted that the rate of inflation was disrupting real sector’s projection and this is definitely having edge on local manufacturing firms’ bottom lines which is a concern for MAN at this time.
“The major drivers of inflation are structural factors, which are beyond the purview and control of monetary authorities. The combination of food supply shocks, foreign exchange (forex) restrictions on food and fertiliser imports, higher energy costs – electricity and petrol, exchange rate adjustment, poor infrastructure, and insecurity in major food-producing states would pressurize domestic price level in the near term.
“We note the adverse implications of rising inflation for households, businesses, investors, and the economy at large this period.
“MAN is calling on the fiscal and monetary authorities on the need to synergise to moderate domestic prices to a level conducive for sustainable and inclusive economic growth.”
He stated that the high inflation rate was driving small and medium scale businesses this time when the whole economy is suffering from the impact of the pandemic, maintaining that the rising inflation is also bringing hardships to the SME businesses in the country with many of them going under despite Federal Government’s efforts to ameliorate the sufferings of small business owners.
For Yusuf, the LCCI DG, the persistent pressure on consumer prices stems largely from the sustained uptrend in food inflation.
He explained that the chamber notes with concern the recent incidents of flooding in key food-producing states in the North, adding that this occurrence has wiped off food and cash crops on a large scale and disrupted output projections in agriculture.