Following last Friday’s disclosure of a staggering 25.80 per cent inflation rate in Nigeria for August by the National Bureau of Statistics (NBS), the Lagos Chamber of Commerce and Industry (LCCI) says it is anticipating that businesses will implement a variety of cost reduction strategies to lower operating expenses and maintain profitability amidst on the back of the inflationary pressures.
This is also as the group urged the Central Bank of Nigeria (CBN) to halt any further planned increase in the interest rate by banks to ease pressure on the supply side of the economy.
Nigeria’s inflation which was confirmed to have hit an 18-year-high rate of 25.8 per cent is believed to be taking pressure from some fiscal and economic policy decisions of the President Bola Tinubu administration, according to experts.
This soaring inflation is further worsened amid a looming industrial action threatened by the Organised Labour over rising cost of living amid stagnant wages.
The local currency’s depreciation, removal of subsidy on petroleum products without a corresponding increase in local production, in addition to rising cost of food prices have all combined to drive up the inflation rate.
While the depreciation of the local is largely attributed to its floating, a measure which led to its freefall in the foreign exchange market, the subsidy removal is directly blamed for the rise in cost of food and transport fares, all of which are tied to petrol pump prices.
The NBS, Friday, had disclosed that the country’s inflation rate has now hit a staggering 25.8 per cent in August, a figure representing an 18-year high last recorded in August 2005.
In May 29, 2023, President Tinubu boldly announced removal of subsidy on imported petroleum products, a move which immediately elicited a rise in food prices and transport fares.
The removal was not informed by any commencement of improvement in local production of the commodities, as marketers were expected to source for foreign exchange from the open market in order to import and supply to the domestic market.
The pressure of demand on the foreign exchange coupled with the slag in local currency negatively impacted on the market, as the Naira stalled and continued its freefall, which further compelled the government to scrap the old regime of coexisting parallel foreign exchange markets by harmonizing it all rates.
According to the NBS, the country’s August inflation figure rose for an eighth straight month from July’s 24.08%, compounding a cost of living crisis worsened by Tinubu’s reforms.
The last time Nigerians experienced this level of inflation was in August 2005, official data shows.
“Nigerian inflation rose faster than expected in August, a month that more typically sees seasonally subdued inflation pressures.
Meanwhile, also reacting to the NBS inflation rate for August disclosure, Director-General, LCCI, Dr Chinyere Almona, in a statement, Monday, identified some of the strategies expected of business operators to adopt downsizing and local sourcing of input factors to remain afloat in view of the attendant rising overhead cost of operations.
She added that households’ real income would continue to experience decline, especially in the near term.
Almona said that the LCCI was concerned about the uptick in inflation (year-on-year) driven by increase in both the food and core components of the CPI, adding further that the slow pace of headline inflation month-on-month may be an indication that the path of price movements remains unclear in the near term.
“The Lagos Chamber of Commerce and Industry recommends government to implement prudent fiscal policy measures.
“This is particularly in terms of borrowings as well as address the challenge of food inflation by immediately reducing and removing tax on basic food items to protect the most vulnerable.
“We implore the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents.
“Furthermore, we urge the Central Bank of Nigeria (CBN) to pause interest rate hikes to relieve the pressures on the supply side, especially at this time,” Amona said.