The Centre for the Promotion of Private Enterprise (CPPE) says the federal government cannot curb inflation without taming insecurity and foreign exchange (FX) volatility.
Nigeria’s inflation increased to 32.70 percent in September — the first increase after two consecutive declines.
In a statement on Tuesday, Muda Yusuf, chief executive officer of CPPE, said the major drivers of inflation must be subdued first to see a continuous decline.
“The reality is that the dynamics driving inflation are yet to be effectively subdued,” he said.
“These factors include the depreciating exchange rate, surging fuel price, rising transportation costs, logistics and supply chain challenges, high energy cost, climate change including resultant incidents of flooding, insecurity in farming communities and structural bottlenecks to production.
“These are largely supply-side issues. There is also the factor of seasonality of agricultural outputs which activates seasonal price surge in some food crops.
“Elevated inflationary pressures escalate production costs, weakens profitability, and dampens investors’ confidence.
“Not many investors can transfer cost increases to their consumers.
“The implication is that manufacturers and other investors are taking a big hit resulting from erosion of profit margins as a result of consumer resistance and weak purchasing power.
“It will be very difficult to tame inflation if we do not substantially fix power, logistics and forex and security issues.”
Yusuf said in tackling inflation, the government needs urgent intervention to address the challenges inhibiting production, productivity and security in the economy.
“The real sector of the economy needs to be incentivized to reduce production costs,” he said.
“The government needs to offer concessionary import duty on intermediate products for industrialists.
“The effects of high energy cost and exchange rate on inflation is quite significant.
“Regrettably, there are no quick fixes in these areas.
“But it is important to prioritize these issues and drive accelerated progress with the right strategies.”
The CPPE boss said the proposed economic stabilisation bill currently before the national assembly would substantially address the concerns from the fiscal side.
He also said states have critical roles to play in mitigating the challenge of food insecurity and food inflation.
“They are closer to the stakeholders in the agricultural and food value chain and better placed to impact agricultural productivity,” he said.
Yusuf also said the provision of rural roads by the states is also very critical to reduce transportation costs and ease access to markets.
