To tame the current inflationary pressure, the Federal Government will need to reform the foreign exchange market to stabilise the exchange rate and reduce volatility in the system. Former Director General of the Lagos Chamber of Commerce and Industry, Muda Yusuf, has said.
Yusuf, who spoke with a crop of financial journalists in Lagos recently, observed that high inflationary pressures remained a major concern to stakeholders in the Nigeria economy.
He said although the economy witnessed an incremental deceleration in inflation over the last couple of months, inflation comes with certain implications especially as it will lead to escalation of production and operating costs for businesses.
He, however, listed major inflation drivers and cost in the economy to include exchange rate depreciation which he said has a significant impact on headline inflation, especially the core sub index.
He noted that the steady but marginal deceleration in headline inflation over the past few months is noteworthy. However, inflationary pressures remain a key concern in the Nigerian economy, both for businesses and the citizens.
According to the National Bureau of Statistics, headline inflation decelerated by 0.38 per cent in September from 17.01 per cent in August to 16.63 per cent. However, on a month-on-month basis, there was a further increase of 1.15 per cent between August and September.
Meanwhile, food inflation, which is the biggest worry for the poor, decelerated by 0.73 per cent from 20.3 per cent in August to 19.57 per cent in September.
He said that liquidity challenges in the foreign exchange market are impacting adversely on manufacturing output while security concerns has significantly affected agricultural output.
The former LCCI boss also urged government to seriously address the security concerns causing disruption to agricultural activities, including high transportation cost, reduce fiscal deficit monetisation to minimize incidence of high-powered money in the economy.
According to him, structural constraints has impacted productivity in the agricultural value chain while high transportation costs has increased distribution costs across the country. “This is also reflected in the huge differential between farm gate prices and market prices”
He said efforts should be focused on management of climate change consequences to reduce flooding and desertification, ensure the restoration of normalcy and good order at the nations ports to reduce transaction costs.
“Climate change has also effected agricultural production as there are increasing cases of flooding and desertification in many parts of the country which comes with negative impact on agricultural output.
“There is also the need to reduce import duty on intermediate products and raw materials for industries to reduce production costs, especially in the light of the sharp depreciation in the exchange rate, address concerns around high energy cost and create an investment friendly tax environment” he said.