Lagos Chamber of Commerce and Industry has advised that for Nigeria to tackle inflation it needs to fix supply-side challenges, particularly the fiscal deficit monetisation by the Central Bank of Nigeria.
This was disclosed by LCCI boss, Dr Muda Yusuf, in an interview in Lagos after the National Bureau of Statistics released the latest inflation figures.
Dr Yusuf revealed that CBN’s deficit financing, which has increased significantly, is highly inflationary due to its profound effect on money supply growth.
Other supply side issues remain the security situation, cost of transportation and logistics, energy costs, exchange rate depreciation, and illiquidity in the forex market, according to Dr. Yusuf.
“Monetisation of fiscal deficit has lately become an added factor.
“From month on month perspective, inflation accelerated across all parameters and this underscores the fact that inflation remains a major challenge to investors and citizens,” he said.
He added that inflation was the biggest poverty accelerator because it weakened real income, eroded purchasing power, put pressure on operating costs, aggravated production costs, reduced sales, and negatively impacted profit margins across sectors.
“Tackling inflation would require fixing these supply-side challenges reining in on fiscal deficit monetization,” he added.
Nigeria’s inflation rate dropped further for the second consecutive month to stand at 17.93 percent in May 2021 from 18.12per cent recorded in April 2021.
Food inflation dropped from 22.72percent recorded in April 2021 to 22.28 percent in May 2021, indicating the second consecutive decline in the food index.