How FG can tame Inflation in Nigeria, by CPPE Boss

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How FG can tame Inflation in Nigeria, by CPPE Boss

The Centre for the Promotion of Private Enterprise ( CPPE) has ascribed the marginal increase in headline inflation from 15.4 percent in November 2021 to 15.63 percent in December 2021 mainly to uptick in demand during the December festivities.

According to CPPE, food inflation rose from 17. 21 % to 17.37 % in the review period, describing it as the biggest worry for the poor.

A statement signed by the Centre’s Chief Executive Officer, Dr Muda Yusuf, affirms that inflationary pressure increases production costs and erodes profit margins.

Yusuf appealed to the government to address the structural imbalances through a range of measures, including reform of the foreign exchange market, more proactive intervention in insecurity which disrupts production.

“ The eight months steady deceleration in headline inflation was brought to a halt with the marginal spike in the December 2021 headline inflation from 15.4% in November 2021 to 15.63% in December 2021. 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.
Meanwhile, inflationary pressures remain a significant macroeconomic risk in the Nigerian economy. It is a major concern to both businesses and the citizens. Meanwhile, food inflation, which is the biggest worry for the poor, rose from 17.21% in November to 17.37% in December. But on a month-on-month basis, there was an increase of 2.19%.

“ The Core inflation, which relates to non-agricultural products, maintained an upward trend. It increased from 13.85% in November to 13.87% in December. This was largely a reflection of the impact of currency depreciation and the liquidity challenges in the forex market. 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. Some of the implications include 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,

“ Surge in consumer spending was driven by the December festivities. Exchange rate depreciation has a significant impact on headline inflation, especially the core sub index. Liquidity challenges in the foreign exchange market impacts adversely on manufacturing output. Security concerns affects agricultural output. Climate change affects agricultural production. There are increasing cases of flooding and desertification in many parts of the country and these have negative impact on agricultural output. Structural constraints affects productivity in the agricultural value chain. while high transportation costs affects distribution costs across the country.

“ To tame the current inflationary pressure, government need to fix the foreign exchange market to reduce volatility. It must
address forex liquidity issues through appropriate policy measures. More attention be paid to security concerns causing disruption to agricultural activities and high transportation cost. There must be reduction of fiscal deficit financing by the CBN to minimize incidence of high-powered money in the economy. Nigeria should climate change consequences to reduce flooding and desertification. “, according to the statement.

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