Nigeria’s inflation moderated to 33.40% in July 2024 from 34.19% in the previous month, as released by the National Bureau of Statistics (NBS). The slight moderation recorded in the month is the first since December 2022, reflecting ease in price pressures due to a slow-down in demand and some monetary and fiscal policy interventions. It is also good news to the business community as we expect some respite from the biting effect of the unbearable high interest rates that businesses have had to cope with in several months in the recent past. As we begin to see the impact of actions taken by monetary and fiscal authorities, we urge the government to sustain all the cost reliefs initiated to reduce the cost of doing business in Nigeria.
The Chamber notes that core inflation rising from 27.49% in June to 27.47% in July is a scenario that calls on policymakers to choose the appropriate policy mix to drive down the deceleration of inflationary pressures continually. In addition, the current inflation environment should also be used as an opportunity to look beyond and consider longer-term issues, particularly in the economy’s agriculture, manufacturing, and export sectors.
The many programmes and policies initiated to tame inflation and stabilize the exchange rate must be sustained and extended to impact more economic players, thereby multiplying the economic effect in the medium term. We advise the government to sustain and expand programmes and policies like the import duty waivers on food and drugs, the introduction of Compressed Natural Gas (CNG) vehicles to give way to cheaper means of transportation, the several foreign exchange market reforms to boost supply, the decision to make provision for direct crude supply to local refineries, and the transition to renewable energy.
To extend the recorded ease in prices, we must attend to the root causes of food insecurity in Nigeria, such as empowering lowly skilled farmers with access to required information on crop production, market prices, and technology; providing more agricultural input like fertilizer and extension services; invest more in agrarian mechanization; resolve land use conflicts; mitigate climate change impact on farmlands; and initiate modern irrigation methods.
The not-too-good news from the Central Bank’s report that the Purchasing Managers Index for July fell below the optimism level of 50%, marginally falling to 49.7%. Consistent work is needed to create some certainty in the policy environment to boost the confidence of industries in the economy in the coming months.
The reinforced fight against crude oil theft and pipeline vandalism must be sustained to ensure a higher output that can cater to the crude supply requirements of local refineries.
Beyond food crops, poultry and fisheries are key drivers of food inflation as common food items like beef, fish, eggs, and chicken have recorded consistently high prices in recent months, contributing significantly to food inflation in the country. The newly created Ministry of Livestock Development is expected to play a critical role in addressing this shortage of poultry and fisheries at a time like this.
With the Local Government Areas having access to more funds, we expect to see a grassroots development revolution as the subnational governments take more responsibility for the economic development of their states and local government areas. The subnational governments should replicate the tested initiatives at the federal level to create the vast multiplier effect the economy needs.
The perception about Nigeria continues to take a hit, and investors’ confidence is being beaten down due to threats and fears of insecurity. The fight against all the elements of insecurity must be sustained to improve on the recent wins by our armed forces.
Finally, we urge the government to support the economy’s productive sector and incentivize the production of exportable goods where the country has a comparative advantage to increase FX earnings and sustain stability in the FX market.
Dr. Chinyere Almona, FCA
Director-General
Lagos Chamber of Commerce & Industry
Friday 16th August 2024
