The Centre for Promotion of Private Enterprise (CPPE) has identified depreciating exchange rates and escalating transportation costs as primary factors contributing to the increasing inflation rate in Nigeria.
This observation was made by Muda Yusuf, the CEO of the CPPE, in response to recent data from the National Bureau of Statistics (NBS) indicating a rise in the consumer price index (CPI) to 26.72 percent in September 2023, marking the ninth consecutive increase in the country’s inflation rate this year.
Persistent inflationary pressures
Yusuf expressed concerns about the persistent inflationary pressures in the Nigerian economy, emphasizing their adverse effects on poverty and dwindling purchasing power.
He noted that the risk of stagflation is on the rise, and key inflation drivers, such as the depreciating exchange rate, surging transportation costs, logistic challenges, forex market illiquidity, substantial increases in diesel prices, climate change, insecurity in farming communities, and structural production bottlenecks, have become more intense.
Yusuf highlighted that these challenges primarily affect the supply side of the economy and result in increased inflationary pressures, which, in turn, impact production costs, profitability, shareholders’ value, and investor confidence.
He noted that many producers and service providers cannot transfer these cost increases to consumers, making products with high demand elasticity particularly vulnerable.
To address these issues and combat inflation, Yusuf called for urgent government intervention to tackle the challenges affecting production, productivity, and security in the Nigerian economy.
He suggested incentivizing the real sector of the economy to moderate production costs, possibly through concessionary import duties on intermediate products for industrialists and investors in the logistics sector.
Yusuf stressed the importance of declaring a state of emergency in the energy and power sectors, citing the devastating effects of high energy costs.
Without resolving these core issues, he warned that taming inflation would be challenging, and urged the government to prioritize and expedite progress in these areas with appropriate strategies.