Follow Us on Google
Stories by Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI) has expressed worry over continued upsurge in domestic consumer prices as headline inflation accelerated to 16.47 per cent in January.
Calling on government to address security issue, as far as food production is concerned, the chamber noted that the uptick in prices was largely driven by the persistent food inflationary pressures, hitting a record 20.57 per cent, the highest level since the 2009 Consumer Price Inflation series began.
The January figure is the highest since April 2017, according to figures disclosed by the National Bureau of Statistics in its Consumer Price Inflation report.
Director General of the chamber, Dr Muda Yusuf, who stated this, explained that heightened insecurity, which was more pronounced in Northern and Middle-Belt region, increased cost of transporting food items from farms to markets, weak productivity in the agriculture sector and increased cost of agricultural inputs, were major factors responsible for the uptick in headline inflation which are basically supply-side issues.
Yusuf also noted that Naira exchange rate and foreign exchange liquidity concerns, have disrupted production plans of many manufacturing firms following acute shortages of raw materials and other inputs. Other factors he said include higher energy costs (PMS, Diesel, and power) which have been on an upward trajectory for two consecutive months and uptrend in the financing of fiscal deficit by the Central Bank of Nigeria through the ways and means facility.
The LCCI boss noted that the implications of the consistent rise in domestic prices translate to increased production costs for manufacturing companies, with consequent impact on their bottom line since it is not in all situations that higher inputs costs can be transferred to consumers.
This, he said, weakens the capacity of corporates to deliver value to shareholders via dividend payment amid dim profit prospects.
Yusuf added that rising food prices, if unresolved, would worsen Nigeria’s poverty situation, and deepen negative real returns on investment securities such as treasury bills, bonds, etc, even as yields on these instruments are unattractive relative to emerging market peers.
Going forward, the LCCI boss emphasised the need to ease logistics costs, stabilise the foreign exchange market to reduce liquidity concerns and associated uncertainties and disruptions in the economy.
He also suggested the need to expeditiously resolve port challenges and related bottlenecks, which is negatively affecting production flows in the country.
Strict adherence to the statutory limit of CBN overdrafts to the government going forward, he noted, was imperative.
“We note the moderation in the monthly headline sub-index from 1.61 per cent in December 2020 to 1.49 per cent in January 2021, mirrored the food sub-index (Dec-2020: 2.05 per cent; Jan-2021: 1.83 per cent).
“This could be ascribed to the fact that festive-induced demand for food items, which elevated food prices in December 2020, moderated considerably in January 2021.
“Core inflation, which captures prices of non-food commodities and services, rose to a three-year of 11.85 per cent in January 2021, buoyed by price increase in housing, water, electricity, gas, and another fuel component (Dec 2020: 9.1 per cent; Jan-2021: 9.4 per cent) and transportation component (Dec 2020: 13.1 per cent; Jan-2021: 13.6 per cent).
“The naira exchange rate depreciation and the forex liquidity challenges were also major drivers of core inflation pressures.”
