Follow Us on Google
Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI), has bemoaned the closure of the land borders, saying it triggered recent inflationary pressure through rising food prices.
President of LCCI, Toki Mabogunje, who made the remark at a Stakeholders’ Forum On Border Closure in Lagos, pointed out that food inflation has continued to uptrend, hitting a record 14.7 per cent in December 2019, the highest in 20 months.
Mabogunje said the policy action has had positive and negative implications for the economy.
“On the positives, we have seen appreciable increase in domestic rice and poultry products production while fuel smuggling to neighbouring countries has reduced. The directive paid off for the Nigerian Customs Service as revenue generated by the agency increased to N1.34 trillion in 2019 from N1.2 trillion in 2018.
“On the flip side, the closure of the land borders has triggered inflationary pressure through rising food prices. Food inflation continues to uptrend, hitting a record 14.7 per cent in December 2019, which is the highest in 20 months. This policy pronouncement has also led to unplanned losses for manufacturers, especially those who export their products to neighbouring countries by road.”
She noted that the policy pronouncement has led to unplanned losses for manufacturers, especially those who export their products to neighbouring countries by road.
“Cross-border trade has been stifled as traders from neighbouring countries can no longer access Nigerian market by road. The border closure has also paralysed commercial activities in border communities. Trade sector is currently feeling the backlash of this policy.”
The LCCI boss said according to official statistics, the trade sector fell into recession in the third quarter of 2019, even as its contributions to the Gross Domestic Product (GDP) dropped by 1 per cent in the same period.
The Presidency had ordered the closure of Nigeria’s land borders with its neighbours on August 20, 2019, to curtail the smuggling of rice, other staple products, arms, ammunition and premium motor spirit as well as to strengthen internal security.
Also, International Monetary Fund (IMF) has said consumer prices in Nigeria jumped 12.1 per cent in January as food shortage caused by the border closure continues to raise prices of staples.
With inflation rising for the fifth straight month and hitting its highest level since April 2018, the naira could be one of the first casualties, but it does not end here.
Experts have however warned that the growing inflationary pressure building momentum in the face of 2019 border closer may force the Central Bank of Nigeria (CBN) to deploy unconventional monetary policy tools to support the Nigerian economy.
An interest rate hike could contain inflation but this will be at the expense of consumer spending and business investment.
Meanwhile, following the outcome of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) on tightening monetary position resulting in the upward review of the Cash Reserve Requirement (CRR) from 22.5 per cent to 27.5 per cent, Director-General of the LCCI, Muda Yusuf, said the biggest challenge facing the country’s inflation rate is curtailing the rising food inflation.
Yusuf, in an interview in Lagos said the argument that recent hike in CRR would help moderate inflation in the country is not of much importance than contending with food inflation, which is a bigger issue that needs to be dealt with in the inflation equation at the moment.
According to him, over the past few years, food inflation has remained in double-digit, with Nigerians suffering to meet their daily food needs because of the skyrocketing prices of food items in the country.
He emphatically stated that the apex bank needs to urgently fix the structural problems fueling inflationary pressure as monetary policy instruments will have almost no impact in moderating inflation.
Statistically, the LCCI director- general explained that food inflation rate hit14.67 per cent in December 2019, the highest in the last twenty months, adding that this was a danger signal to the country’s agriculture sector value chain in all ramifications.
Yusuf said, “On the argument that the recent hike in CRR will help moderate inflation, we contend that food inflation is the bigger issue that needs to be dealt with in the inflation equation. Over the past few years, food inflation has stubbornly remained in double-digit territory since June 2015 while core inflation trends in single digit.
“We believe that food inflation is not driven by liquidity nor is it a monetary phenomenon. The continuous uptrend in inflation is driven largely by cost-push factors rather than demand-pull factors. “Against this backdrop, the way forward lies in fixing the structural problems fueling inflationary pressure as monetary policy instruments will have almost no impact in moderating it.
