Concerns as Inflation Hits Four-year High at 18.17%

*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.

*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.