Analysts yesterday called on the federal government to leverage on the COVID-19 pandemic and incentivise local food production, especially agribusiness, to boost the economy as headline inflation increased to 13.71 per cent in September from 13.22 per cent in the preceding month.
They said the support for local production would boost employment generation and reduce insecurity as well as curtail inflation in the long run. The analysts also called for further reduction in Monetary Policy Rate (MPR) to encourage the investment of more funds in the real sector, adding that moral suasion alone appeared to be limited in the current situation.
The analysts, who spoke in separate interviews with THISDAY in response to the inflation outcome, also stressed the need for the government to support farmers in the entire agricultural value chain with credit and create avenues for foreign market penetration. They stated that the harvest season may not significantly curb inflation except issues of insecurity and foreign exchange pressures are addressed.
They also asked the government to speed up the implementation of the mass agriculture programme in the Economic Sustainability Plan in order to arrest the rising inflation. The analysts were reacting to the latest data from the National Bureau of Statistics (NBS), which showed that the Consumer Price Index (CPI), which measures inflation rose to 13.71 per cent (year-on-year) in September compared to 13.22 per cent in the preceding month.
According to the CPI report for September, which was released yesterday by the statistical agency, the 0.49 percentage increase occurred in all the divisions that determine the headline index. The composite food index rose by 16.66 per cent in September compared to 16 per cent in August. All items, less farm produce or core inflation, which excludes the prices of volatile agricultural produce stood at 10.58 per cent in September, up by 0.06 per cent when compared with 10.52 per cent recorded in August.
This rise in the food index resulted from increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fish, fruits and oils and fats as the sub-index increased by 1.88 per cent in the review period, up by 0.21 percentage points from 1.67 per cent in August. On the other hand, core inflation was fuelled by the highest increases in prices of passenger transport by air, medical services, hospital services, pharmaceutical products, passenger transport by road, motor cars, vehicle spare parts, maintenance and repair of personal transport equipment, repair of furniture and paramedical services.
However, against the backdrop of the rising inflation, economist, Dr. Muhammad Rislanudeen, predicted further rise inflation due to the hike in food prices, adding that “with the recent flood in many states, insecurity and border closure, the cost-push-induced inflation may continue heading northwards.”
He said: “We need to positively leverage COVID-19 by incentivising local food production and agribusiness. That will also support employment generation and reduce insecurity. “We need to positively leverage on COVID-19 by incentivising local food production and agribusiness. That will also support employment generation and reduce insecurity.”
Former Director-General of the Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, said the continuous increase in the headline index was an obvious indicator of a weak economy. According to him, many failed economies of the world are characterised by high inflation rates and high exchange rate for their currencies.
“Nigeria’s high inflation rate is therefore indicative of a struggling economy. This trend is expected to continue as far as the exchange rate of naira to other currencies continues to be high. The new petroleum products pricing has added to the pressure of the inflation rate,” he added.
On his part, Professor of Finance and Capital Markets at Nasarawa State University, Prof. Uche Uwaleke, said while the harvest season may not significantly control inflation, except issues of insecurity and forex pressure are addressed, the agricultural interventions by the Central Bank of Nigeria (CBN) should be monitored to ensure that the funds are utilised for intended purposes.
He stated that the uptrend in inflation was not unexpected, adding that “it is the immediate outcome of the increase in the pump price of fuel, the value-added tax, electricity tariffs as well as the implementation of stamp duties and continuous border closure.”
He added: “All these factors aggravated the legacy issues reflected in infrastructure deficit, especially power and transport, as well as illiquidity in the forex market and insecurity. “It is also not a surprise that food inflation is exerting the most pressure, rising by as high as 16.6 per cent in September, owing to supply shortages from the lingering effects of COVID-19 and insecurity challenges in some food-producing areas of the country.”
Also, an Associate Professor of Agricultural Economics at the University of Port Harcourt, Anthony Onoja, stated that the persistent increase in inflation has negative implications for the receding Nigerian economy. He said the inflation rate was exacerbated by the full deregulation of oil sector and hike in electricity tariffs in September, adding that the policies pushed up costs of production and delivery of services, which were transmitted to households via cost-push inflation.
“Government needs to support farmers and agricultural sector with credit, avenues for foreign market penetration, reduce the ease of doing business and implement policies that will improve domestic production such as infrastructural improvements before the full harvest season arrives.
“As we move towards the Yuletide season, there will be more pressure on the naira as demand for foreign exchange will increase. Hence small-and medium-scale industries should be aided with credit and insurance policies to enable them get out of liquidation,” he added.
However, Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelling, urged the government to consider further reduction in interest rate. He said the rising inflation erodes disposable income and reduces purchasing power, adding that this will have a knock-on effect on economic growth as reduction in consumption could stagnate the economy.