By Charles Okonji
The Manufacturers Association of Nigeria (MAN) has stated that a stable exchange rate is crucial to controlling inflation, advising that the Central Bank of Nigeria (CBN) should implement effective exchange rate policies that prevent sharp depreciation of the currency, which has continued to lead to imported inflation.
According to the Director-General of MAN, Mr. Segun Ajayi-Kadiri, addressing the problem of free fall of Naira in both official and parallel markets by improving liquidity in import and Export (I&E) window was paramount.
He expressed that employment of collaborative fiscal policy measure through budgeting and effective taxation would complement the monetary policy actions taken by CBN.
“Increased targeted support to the agricultural sector to enhance productivity, reduce reliance on imports and stabilize food prices. Formulation of policies that promote a stable and conducive business environment which can attract both local and foreign investments, leading to increased production, job creation, and ultimately, stability in prices.
“Communicate effectively with the public and stakeholders about the government’s commitment to controlling inflation. This can help manage inflation expectations, which can influence price-setting behavior. Addressing the challenges of insecurity and deploying fiscal reforms that prioritizes productivity and intensify infrastructural development to stimulate economic activity, create jobs and improve living conditions,” the D-G said.
Ajayi-Kadiri also advised the government to implement structural reforms that enhance transparency, reduce bureaucracy and improve the ease of doing business.
Commenting on the negative impact of inflation on manufacturers, the D-G stated that rising inflation often leads to higher costs of raw materials, labour, and other production inputs, adding that manufacturers might find it more expensive to procure resources necessary for their production processes, thereby squeezing profit margins.
Lamenting on the severity of inflationary impact on manufacturing sector, he said: “As costs increase due to inflation, manufacturers might struggle to pass on these cost increases to consumers in the form of higher prices. This will result in reduced profit margins, especially as it is becoming more difficult to pass the burden to the consumers as a result of income squeeze leading to price resistance.
He pointed out that inflation is not only disrupting supply chains, but making it difficult for manufacturers to obtain necessary materials and components.
He emphasized that inflation leads to delay in production adding that it potentially halt operations as key supplies become scarce or unavailable.
In his words: “Inflation introduces a level of uncertainty in economic conditions. Manufacturers will continue to find it challenging to make long-term business plans due to unpredictable cost fluctuations, demand shifts, and overall economic instability.
“High inflation often reduces consumers’ purchasing power. As prices rise, consumers are cutting back on discretionary spending, including manufactured goods. This leads to decreased demand for products which adversely affects manufacturers’ sales.”
previous post
