…Says Nigeria is currently suffering stagflation
The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) has raised alarm over continuous rise in inflation, as the country’s inflation rate increased to 20.52 percent in the month of August 2022 from 19.64 percent recorded in the previous month.
The NACCMA who made this known to the media in a press release on Tuesday, noted that the Nigeria economy is currently suffering stagflation rather than inflation.
“According to trading economics, this newly recorded figure exceeded market expectations of 20.25 percent, making it the highest figure recorded in the country since September 2005. Although these inflationary statistics might be incorrectly underestimated, considering the primary research on the prices of essential food, transportation and household goods.
“The seventh consecutive monthly increase since February, indicating a 3.52 percent increase when compared to the August 2021 inflation rate of 17.01 percent. Food inflation also increased to 23.12 percent in August 2022, a 1.1 percent increase from the 22.02 percent recorded in July 2022.” NACCIMA stated.
The leader of the Organised Private Sector (OPS) pointed out that a number of factors contributed to the increase in inflation, explaining that the high cost of raw materials, the devaluation of the naira, and the disruption of the supply chain caused by insecurity, amongst others were responsible.
The Association pointed out that the persistent insecurity in the nation has continued to impede agricultural activities and deter investments in agriculture in the nation’s food-producing regions, resulting in a decline in agricultural output.
“As a result of the war between Russia and Ukraine, the worldwide inflation rate has increased, which has led to an increase in the price of oil and food. This made it difficult for not only those with low incomes but for those with middle incomes to afford necessities. Nigeria’s dependence on these countries for agricultural commodities such as grains and wheat for direct consumption and industrial commodity production has had a significant effect on food prices.
“Due to the invasion of the Ukraine, the country’s imports are inadequate to meet the expanding demand for daily consumption products, as Nigeria, along with other African nations, historically relied on wheat imports from the Ukraine.
“In 2021, Nigeria imports around 98.5 percent of the required quantity, leaving Northern states with a production capacity of 1.5 percent. Even though wheat matures in only 150 days and can be cultivated on all soil types except for severely damaged alkaline and waterlogged soils, the security situation in the country has impeded Nigeria’s potential to improve production.
“The rising level of insecurity has a direct effect on the production capacity of most farmers, with Nigeria having over 80 percent of the farmers to be smallholders. These farmers are unable and frightened to do their normal farming due to the security situation in the country, despite the fact that these individuals make a living from farming and contribute significantly to the country’s food supply. In addition, they contributed to the provision of raw materials for food processing and for majority of agro-allied businesses. The same impact poses a greater threat to rural-to-urban conveyance of agricultural products. Consequently, the entire agricultural value chain has been disrupted due to the restrictions imposed by insecurity. It is conceived that the primary cause of inflation, particularly food inflation, is endogenous.
“Similarly, the present global increase in fuel prices and the resultant increase in diesel prices have a direct impact on the prices of goods produced with petroleum products. Notably, increased transportation, manufacturing, and heating costs have indirect implications on the cost of goods. It is increasingly crucial for most manufacturing enterprises to consider energy cost efficiency and become more reliant on alternative energy for production.”
NACCIMA regretted that most farmers and those earning a living within the value chain have been left unemployed, worsening the spiraling unemployment rate in the country, adding that Nigeria is currently suffering stagflation rather than inflation.
“According to the year-over-year percentage change in inflation in Nigeria, the Nigerian economy has shifted significantly into a walking inflation. That is, the country’s economy is too swift for individuals and businesses to sustain. It is a well-established fact that Nigeria relies heavily on import of finished goods demanded by households and raw materials used by industry. Ironically, with the proper infrastructures, these items may be produced domestically.”
Suggesting ways out of the economic quagmire, NACCIMA adviced the government to develop and implement policies targeted at increasing food supply and decreasing enterprises’ production costs.
“Moreover, encourage local production and ensure that adequate infrastructures are put in place to meet the country’s needs and strengthen the food supply chain. This will also encourage the private sector and attract Foreign Direct Investment (FDI), thereby positively impact the Gross Domestic Product (GDP). Nigeria can increase its output if the nation’s production problems are addressed in the interest of inclusive economic growth and development.
“In addition, we urge governments at all levels to promptly utilize all available resources to fill the gap in wheat imports, as well as to make a longer-term commitment to minimize imports by providing both financial and technical supports for the wheat production value chain. For the development of wheat production in the country, it is essential to involve the appropriate agricultural industry stakeholders, including research institutes. Also, the country must address the insecurity that has impeded agricultural production. As we approach the wheat planting season (November and December), we expect the government to give local wheat production the deserved priority,” the Association stressed.
