…Experts Reacts To Nigeria’s Inflation Crisis
By Rotimi Asher, Lagos
Lagos Chamber of Commerce and Industry ,LCCI, has raised concerns on the impact of Nigeria’s inflation rate, which surged to a 28-year high of 34.60% in November.
The unprecedented rise is tightening margins for businesses across the country, as soaring prices strain operations and reduce profitability.
According to the LCCI’s Director-General, Dr. Chinyere Almona, businesses should brace for further challenges as elevated inflation signals a likely increase in interest rates.
“The Central Bank of Nigeria ,CBN, is expected to respond to these inflationary pressures with higher interest rates following its upcoming Monetary Policy Committee ,MPC, meeting”, Dr. Almona warned in a statement.
The LCCI highlighted the far-reaching consequences of the inflation surge. Consumer spending has significantly declined due to diminished disposable income, particularly as food and core inflation erode purchasing power.
Non-essential goods and services have seen reduced demand, further pressuring businesses. Rising costs for transportation, rent, and energy have compounded the situation, increasing production expenses and cutting into profit margins.
“The persistent high inflation weakens Nigeria’s macroeconomic stability, deterring local and foreign investments”, Almona noted.
The chamber pointed to the country’s capital importation data as a red flag, adding that $1.25bn was recorded in the third quarter of 2024, a stark drop from $2.60bn in the previous quarter.
Of this amount, Foreign Direct Investment ,FDI, contributed only $103.82m, underscoring investor concerns over Nigeria’s economic climate.
In addition to addressing inflation, the LCCI emphasized the need for sustained efforts to boost production and defend the Naira.
Almona called for coordinated policies to enhance oil production and attract foreign exchange ,FOREX, alongside regulatory reforms to create a stable investment environment.
“Recent investments in oil fields must be supported by sound policies to maintain and attract further capital”, she said.
The LCCI also underscored the importance of addressing insecurity to stabilize agricultural production and curb soaring food prices.
The organization urged the government to invest in intelligence and surveillance technology, increase funding, and pursue constitutional amendments to enable multi-level policing.
Despite these challenges, the LCCI remains optimistic about the potential of ongoing reforms.
“If sustained, these measures can steer the economy back toward growth and improve critical indicators such as inflation.
meanwhile, Nigeria’s headline inflation rate surged to 34.60% in November 2024, reflecting a further rise in the cost of goods and services across the nation has drawn reactions from key financial experts.
Inflation in Nigeria has risen to 34.60% in November 2024, reflecting a 0.72% increase from October’s rate of 33.88%.
According to the latest Consumer Product Index report released by the National Bureau of Statistics on Monday, this marks a significant year-on-year rise, with the November 2024 rate being 6.40 percentage points higher than the 28.20% recorded in November 2023.
The financial experts in a chat with journalists said Nigeria’s inflation rate which reached 34.60% in November 2024, was driven by rising energy costs, currency depreciation, and weak fiscal policies.
They emphasized addressing energy prices, exchange rate stability, and food inflation to reverse the trend.
The experts also highlighted the need for improved agricultural production, reduced public borrowing, and a focus on security to curb inflation.
Managing Director/CEO of Arthur Stevens Asset Management Limited and a former President of the Chartered Institute of Stockbrokers, Olatunde Amolegbe reacting to the latest inflation figures described the development as unsurprising given the prevailing economic challenges.
“Honestly, this is expected, given the rising price of energy as well as the depreciating exchange rate”, he stated.
Amolegbe highlighted the importance of addressing the twin drivers of inflation—energy costs and the exchange rate—to reverse the current trend.
“Halting this continuous slide in the inflation rate will hinge on controlling these two indices”, he said.
He further emphasized the need to get food inflation under control, which remains a critical component of the overall inflation figure.
The Managing Director/CEO of Highcap Securities, Mr. David Adonri attributed the persistent inflation to weak and contradictory fiscal actions that undermine monetary policy.
“The Nigerian economy will continue to contend with rising inflation as long as fiscal actions remain feeble and contradictory to monetary policy”, he remarked.
He noted that the demand management measures implemented in 2023, such as the removal of fuel subsidies and the floating of the Naira predictably led to higher inflation.
However, he emphasized that the lack of concrete efforts to enhance supply remains a fundamental cause of the inflationary trend.
“Firm order is yet to be restored in the agricultural economy, while energy and power supply remain erratic, stifling domestic production”, he stated.
Adonri further highlighted Nigeria’s dependence on imports, which exacerbates inflation due to the continuous depreciation of the Naira. This imported inflation, coupled with the base effect, intensifies the overall inflation rate.
Looking ahead, Adonri urged policymakers to focus on addressing core issues rather than relying on further monetary tightening, which he believes is already negatively impacting production.
“Rather than wasting precious time on further tightening of monetary policy, the country needs to be mobilized against insecurity so that food inflation, which is the arrowhead of inflation, can be terminated”, he advised.
He also called for the discontinuation of reckless public borrowing to finance fiscal deficits, which he identified as another key driver of inflation.
Adonri’s analysis underscores the urgent need for a coordinated approach to address insecurity, stabilize the agricultural sector, and enhance domestic production to combat inflation effectively.
Nigeria’s inflationary pressures have been exacerbated by a combination of domestic and global factors, including higher energy prices, currency depreciation, and supply chain disruptions.
The rising costs of food and transportation have particularly impacted households and businesses, intensifying the economic strain.
Experts have called on policymakers to implement targeted measures to address these challenges. Controlling energy prices, stabilizing the exchange rate, and boosting agricultural productivity are seen as essential steps in mitigating inflation and improving economic stability.
