In response to the rising inflation rate in Nigeria, Adewale-Smatt Oyerinde, director-general of Nigeria Employers’ Consultative Association (NECA), has highlighted eight ways Nigeria can fight inflation.
Data obtained from the National Bureau of Statistics shows an increase in headline inflation to 28.92 percent in December 2023 from 23.75 percent in December 2022.
“To address the high and rising inflation in the economy, it is important that the Central Bank of Nigeria entrenches and sustains productive FX management through adequate intervention in the forex market,” Oyerinde said.
The director-general of NECA added that the monetary authority should also adjust its current reduction of money in circulation to an optimum quantum that will stabilise the economy.
“Government in broad terms should be proactive in its promises for agricultural production as contained in the 2024 budget,” he said.
He stated that there is also the need for the Government to embrace backward integration and resource-based industrialisation to improve food and domestic production of raw materials. “This will reduce the importation of food-related items and raw-materials items to save up FOREX for the economy.”
“The Government should ensure that peace is brought back to the nation’s crisis-ridden areas, invest in sustainable agricultural methods, and upgrade infrastructure to increase food production and tame the pace of food price increases,” Oyerinde said.
BusinessDay analysis of Nigeria’s inflation rate shows that it is the highest since January 2003. The Consumer Price Index report shows that prices rose to 28.92 percent in December 2023 compared with 28.20 percent in November.
Food inflation, which constitutes 50 percent of the inflation rate, rose to 33.93 percent in December from 32.84 percent in November.
The rise in food inflation on a year-on-year basis was caused by increases in prices of oil and fat, bread and cereals, potatoes, yam and other tubers, fish, fruit, meat, vegetables, milk, cheese, and eggs.
Oyerinde said the reason for the persisting high inflation rate in the economy can be explained with the triadic relationship among exchange rate, interest rate and then inflation rate, and the implication on investment.
“Today, the Naira exchange rate stands at N1300/US$ in the parallel market and N878.55/US$ in the I&E window, which feeds into inflation,” he said. “The monetary policy is at 18.75 percent just to maintain an appreciable real interest rate to drive investment.”
“There is the current monetary tightening by the Central Bank through the reduction of the volume of money in circulation, which is also driving prices upward.
“It is evident that the rising food cost would further put a strain on household budgets, elevate food insecurity and lower standard of living,” Oyerinde said. “Thus, immediate action is required to reverse the trend. Effective solutions that support Nigeria’s food security and stability must be developed and implemented.”
He opined that there is no doubt that households’ real incomes have been grossly eroded within this period while firms’ working capitals have significantly reduced.
“The high inflation rate has also negatively affected almost all business metrics in terms of capacity utilisation, production, sales, profit, and employment,” Oyerinde said.
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