Experts advocate structural reforms to tame Nigeria’s rising inflation

Nigeria’s rising inflation, largely attributed to cost-push factors, should not be tackled with interest rate hikes, experts have said.

Instead, they advocated for addressing structural issues such as agriculture and security to attract foreign direct investments and stimulate economic growth.

This was made known at the first edition of ST. RACHEAL’S people consulting’s leadership & economic summit last Thursday. The event themed ‘Economic Prosperity – The Secrets of Audacious Leaders’ brought speakers & a global audience to educate but most importantly proffer solutions to the myriad of challenges bedeviling Nigeria.

“The stagflation we are witnessing is cost-push as a result of three times increase in petrol price, 300 percent naira devaluation and farmers unable to farm because of insecurity,” Akinjide Adeosun, chairman at ST. RACHEAL’S people consulting said.

He said Nigeria must return to ‘Partial Subsidy’ to ensure gains are felt by everyone and that the provision of palliatives is not inclusive and not sustainable.

“I recommend Nigeria engages the World Bank, Africa Development Bank or Afrexim Bank to pay subsidy direct to vendors to minimise probable maladministration of subsidy experienced in the past,” Adeosun added.

Others are reducing petrol prices and USD exchange rates by one-third and engaging retired security personnel to help at the ward level.

“This will reduce insecurity and assist with food security,” he said.

Ndubisi Nwokoma, director of the Centre for Economic Policy Analysis and Research of the University of Lagos said Nigeria’s surging inflation is a cost-push phenomenon.

“So I do not support the hike in monetary policy rates. The stand that the monetary policy committee has taken is to attract FPIs,” he said.

Nwokoma said the government needs to address structural issues like agriculture, and security to be able to attract FDIs.

He added that given the volatilities in the exchange rate, investments in real estate and foreign currency-denominated assets could be a good hedge against loss of value.

The removal of fuel subsidy has provided a breathing space for the government to enhance its expenditure programmes in the economy. Expectedly, it has been highly inflationary and has aggravated the loss of value of naira assets.

Joseph Nnanna, chief economist at Development Bank of Nigeria said revenue has been a challenge with oil theft persisting, insecurity affecting agricultural production, poor infrastructure, and the high cost of sourcing FX affecting manufacturing.

He said at the subnational level everyone should be responsible for growth at their level and inclusive growth means everyone feels about the society.

“There’s a relationship between a hike in the monetary policy rate and economic growth. When the interest rate increases it becomes more difficult for SMEs to borrow.

“Since last year FAAC allocation has been over N1 trillion, meaning that there’s so much liquidity in the economy and technically there should be a level of improvement across the country through the tiers of government,” Nnanna added.