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Inflationary Pressures Remain Significant Risk In Nigerian Economy – Yusuf

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With the release of Inflation report for December 2021, the CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said, inflationary pressures remain a significant macro-economic risk in the Nigerian economy.

The eight months steady deceleration in headline inflation was brought to a halt with the marginal spike in the December 2021 headline inflation from 15.4 per cent in November 2021 to 15.63 per cent in December 2021.

The surge in demand during the December festivities, according to Yusuf, must have played a role in the marginal spike and reversal of the deceleration trend in headline inflation.

The food inflation, which is the biggest worry for the poor, rose from 17.21 per cent in November to 17.37 per cent in December. But on a month-on-month basis, he said, there was an increase of 2.19 per cent.

“The core inflation, which relates to non-agricultural products, maintained an upward trend. It increased from 13.85 per cent in November to 13.87 per cent in December. This was largely a reflection of the impact of currency depreciation and the liquidity challenges in the forex market,” he stressed.

Although the economy witnessed an incremental deceleration in inflation over the past eight months before the reversal in December, he said, high inflationary pressures remain a major concern to stakeholders in the Nigeria economy.

He listed major drivers of inflation and cost in the economy to surge in consumer spending driven by the December festivities; exchange rate depreciation has a significant impact on headline inflation, especially the core sub index; liquidity challenges in the foreign exchange market impacting adversely on manufacturing output; security concerns affecting agricultural output; among others.

He recommended that to tame the current inflationary pressure, government need to; reform the foreign exchange market to stabilise the exchange rate and reduce volatility; address forex liquidity issues through appropriate policy measures; address the security concerns causing disruption to agricultural activities; address productivity issues in the real sector of the economy, and so on

He added that government and relevant stakeholders too must address the challenge of high transportation cost; reduce fiscal deficit financing by the Central Bank of Nigeria(CBN) to minimise incidence of high-powered money in the economy; address concerns around high energy cost; and create an investment friendly tax environment.

Similarly, the chief economist, Coronation Merchant Bank, Chinwe Egwim stated that, “we commend the federal government’s efforts towards improving national security which by extension, should contribute to easing bottlenecks affecting food supply. This bodes well for the food inflation rate.”

It, however, said, factors such as electioneering and the potential removal of PMS subsidy could keep headline inflation at double-digit in 2022.

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