Familiar issues triggering inflation in Nigeria include seasonality, insecurity and food shortage, among others
Following the data released by the National Bureau of Statistics (NBS) showing the country’s headline inflation for June 2022 standing at 18.6 per cent, the Manufacturers Association of Nigeria (MAN) has said that the upward swing signals worsening economic times ahead for Nigerians and the manufacturing sector.
MAN explained that high inflation was a major indication of macroeconomic inadequacies and failure to take steps to address the contributory factors.
The Director-General of MAN, Segun Ajayi-Kadir, disclosed this in a press statement made available to New Tele- graph in Lagos. He said the 18.6 per cent rate portend a gradual journey towards the 18.72 per cent peak inflation rate recorded in January 2017. Obviously, the MAN DG said this was a worrisome acceleration that should be halted, especially given the fact that socio-political and economic activities that trigger spike in inflation are imminent.
According to him, the NBS report revealed that on a month-to-month basis, headline inflation rate increased to 1.82 per cent in June 2022, signifying 0.04 percentage point increase above the 1.78 per cent recorded in May 2022.
In addition, Ajayi-Kadir explained that, according to NBS, the major contributory factor responsible for the surge in headline inflation include increase in prices of gas, liquid fuel, solid fuel, garments, passenger transport by road, cleaning, repair and hire of clothing and passenger travel by air, meat, bread, cereals, fish, potatoes, oil, fat, wine, yam and other tubers.
He pointed out that the familiar issues triggering inflation in Nigeria include seasonality, insecurity, food shortage, shortfall in the supply of raw materials for production of food-related products, fertilisers and others, which are not available locally.
While speaking on the implications of the high inflation rate for the manufacturing sector, the MAN helmsman said these include increase in cost of production inputs with trickle down effects on capacity utilisation, inventory and profitability of manufacturing firms, higher MPR, which will further constrained access to credit and increase the cost of borrowing for manufacturers, especially those in the SMI cadre and upward swing in the value of shares for manufacturing concerns listed on the stock exchange.
He added that it would also have differing implications like reduction in demand for manufactured products leading to poor sales and turnover, lower competitiveness as the high inflation rate further mount pressures on the already very highcost operating environment, which may hinder the prospect of beneficial trade in the region and the continent.
Others include further loss in the value of the naira, increase the tempo of hoarding dollars, deepening of downward swing of export earnings, which of course will worsen the forex challenge in the country and closure of more companies as the capacity to meet obligations to internal and external stakeholders is greatly impaired.
Ajayi-Kadir stated: “MAN strongly believes that high inflation is a major indication of macroeconomic inadequacies and failure to take steps to address the contributory factors will further limit economic growth and increase the rate of unemployment in the country.
By reducing purchasing power, high inflation reduces aggregate demand and limits production which eventually result in a fall in employment.”
On the flip side, the MAN DG added: “It will escalate the value of public debt servicing expenditure due to the exchange rate pass-through effect in the face of increase in fuel subsidy cost and rising global oil prices.
The resultant effect is lesser resources for public investment expenditure needed to catalyze and sustain economic growth.” On fuel scarcity, he said the nationwide fuel scarcity witnessed in June was largely responsible for the rise in inflation.
“The fuel scarcity necessitated further hike in energy prices, particularly prices of diesel, aviation fuel and petrol, which all had trickled down effects on the cost of food, manufactured products, other commodities, transportation and accommodation nationwide. Most notably, the price of diesel has spiked by about 230 per cent in the last one year.”
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