The Manufacturers Association of Nigeria (MAN), the Lagos Chamber of Commerce and Industry (LCCI), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigeria Employers’ Consultative Association (NECA), have blamed the prevailing high inflationary pressure in the Nigerian economy on recent government policies.
They stressed that rising inflation was having adverse effects on the manufacturing sector.
They expressed these views on Wednesday, in separate press statements, following the release of the latest inflation figures by the National Bureau of Statistics (NBS), which showed that the Nigeria’s headline inflation rate accelerated for the seventh consecutive month to 24.08 percent in July 2023, from 21.82 per cent in January.
They also noted that the significant rise in inflation largely reflected the impact of fuel subsidy removal and exchange rate devaluation.
The Director General of MAN, Mr. Segun Ajayi-Kadir, in a statement titled, “Increasing Inflation Rate and Its Impact on the Manufacturing Sector,” noted that, “the current inflationary condition in Nigeria is adversely affecting the operation of the manufacturing sector, just like most other sectors of the economy.”
Ajayi-Kadir added that “elevated inflation serves as a significant sign of underlying macroeconomic weaknesses, and neglecting to tackle the underlying causes will exacerbate constraints on economic expansion and elevate the unemployment rate within the country.”
He added that, “addressing inflation is a complex and long-term endeavor that requires a coordinated effort from various stakeholders, including the government, central bank, private sector, and civil society.”
Ajayi-Kadir called for the deployment of fiscal reforms “that prioritise productivity and intensify infrastructural development to stimulate economic activity, create jobs and improve living conditions.”
He added that some of the impacts of the rise in inflation on the manufacturing sector included increase in cost of production, reduced profit margin, uncertainty in planning, supply chain disruption, reduction of consumer spending, etc.
He said rising inflation often leads to higher costs of raw materials, labour, and other production inputs that manufacturers might find it more expensive to procure resources necessary for their production processes, thereby squeezing profit margins.
“As costs increase due to inflation, manufacturers might struggle to pass on these cost increases to consumers in the form of higher prices.
“This will result in reduced profit margins, especially as it is becoming more difficult to pass the burden to the consumers as a result of income squeeze leading to price resistance.
“Inflation introduces a level of uncertainty in economic conditions. Manufacturers will continue to find it challenging to make long-term business plans due to unpredictable cost fluctuations, demand shifts, and overall economic instability,” he added.
He recommended that the Central Bank of Nigeria (CBN) should implement effective exchange rate policies that prevent sharp depreciation of the currency, “which has continued to lead to imported inflation.”
He advised that government should tackle insecurity and formulate, “policies that promote a stable and conducive business environment which can attract both local and foreign investments, leading to increased production, job creation, and ultimately, stability in prices.”
Speaking in the same vein, the Director General of LCCI, Dr. Chinyere Almona, in a separate statement titled, “LCCI Statement on July 2023 Inflation Rate,” expressed the chamber’s concern that there might be more inflationary pressures in the coming months due to the volatility of the naira as well as the lagged effects of subsidy removal and its transmission to general prices.
Almona said: “LCCI recommends that the government should step up efforts to tackle food costs, especially staple food items.
“We commend the federal government’s declaration of a state of emergency on food security and urge them to prioritize farmers’ areas of assistance like fertilizers and seeds to mitigate the effects of subsidy removal as well as strengthen strategic food reserves to be used as price stabilization mechanisms.
“The chamber implores the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents.”
The Atlas Portfolio Limited, a member of the Cititrust Group, in its “Inflation Report July 2023,” noted that the country’s headline inflation has continued to grow since the beginning of the year, which was further enhanced by the subsidy removal in May.
It stated: “The July inflation report is gradually revealing an upsurge in line with the observed trends in the economy. The CBN’s continuous monetary policy tightening has not addressed the rising inflation rate in the country compared to other developed countries where inflation is not buoyed by shortage in supply.
“Food inflation also continues to increase month-on-month due to challenges in production caused by insecurity, as well as transportation cost. The core inflation growth can be associated with FX scarcity and increase in cost of production. We expect a further hike in inflation rate in August.”
On his part, the National President of NACCIMA, Mr. Dele Kelvin Oye, told THISDAY that he was deeply concerned about the impact of the current high inflation rate on the businesses of NACCIMA’s member businesses and the Nigerian economy as a whole.
Oye said, “the high inflation rate has resulted in an increase in the cost of goods and services, making it difficult for businesses to maintain their competitiveness. This has led to reduced demand for goods and services, lower sales, and, in some cases, loss of jobs. Businesses are struggling to maintain their profit margins, which has impacted their ability to invest and create jobs.
“The high inflation rate has also led to an increase in the cost of borrowing, making it difficult for businesses to access funding. This has led to a slowdown in investment and growth in the economy.”
He added that, “the changes in fiscal policies of government had also led to considerable loss in earned income for several businesses, especially multinational companies whose funds were trapped and saw their previous earnings reduced to losses by inflation and the drastic fall in value of the naira and some of the companies have decided to leave the country.”
Oye, however, restated that as the apex chamber of commerce in Nigeria, the NACCIMA is committed to working with the government and other stakeholders to find solutions to the challenges facing businesses.
“We are advocating for policies that promote macroeconomic stability, reduce the cost of doing business, and stimulate investment and growth. We are also encouraging our members to explore innovative ways to improve their efficiency, reduce costs, and remain competitive,” Oye said.
Reacting to the rising inflation rate, the Director General of NECA, Mr. Adewale-Smatt Oyerinde, said the government should develop policies that would address the associated challenges in the food value-chain.
Oyerinde told THISDAY that the government should encourage domestic manufacturing to lower the country’s reliance on imported finished goods.
He said: “Since food constitutes the highest component of the Consumer Price Index (CPI), which also accounts for about 68 per cent of an average household spending in the country, the government should develop policies through executive order for immediate intervention in addressing the associated challenges in the food value-chain.”
He also suggested that the government should nip in the bud the ravaging insecurity challenges in the north and middle belt of the country and develop “infrastructures toward mitigating the flooding issues that would massively affect farmlands along the coastal regions and rising cost of energy.”
Oyerinde further stated that high import costs could be avoided by “encouraging domestic manufacturing and providing domestic enterprises with the necessary support, such as credit access and suitable infrastructure.
“Furthermore, if these policies are implemented promptly, they will stabilise and strengthen the currency in the aftermath of the recent unification of exchange rates, ensuring that the price of Premium Motor Spirit (PMS) at the pump is reduced, lowering general transportation costs and, as a result, inflation rates will decline.”
Oyerinde said that on a year-on-year basis, the headline inflation was 4.44 per cent points higher compared to the rate recorded in July 2022, which was 19.64 per cent, and also 1.29 per cent points increase when compared to the previous month.
He attributed the rise in inflation to several factors such as impact of the fuel subsidy removal on transportation cost, the skyrocketing exchange rate, food shortages due to increasing insecurity in the food producing states of the north. These among others have impeded negatively on the purchasing power of citizens and cost of living.
Dike Onwuamaeze
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