The Manufacturers Association of Nigeria (MAN) has expressed concern over the rising inflation rate in the country. A press statement from the association recalled that the surge in inflation experienced by Nigeria with the rate reaching a new 18-year high of 24.08 percent was quite worrisome. The rate increase by 1.29 percent from the previous month’s rate of 22.79 percent, as reported by the National Bureau of Statistics (NBS). The rise in inflation was majorly driven by higher prices of food items. Over the course of a year, the inflation rate had risen by 4.44 percentage starting from 19.64 percent in July 2022.
Specifically focusing on food, the 2023 inflation rate increased to 26.98 percent in July from 25.25 recorded in June. In comparison to July 2022, the year-on-year food inflation rate was 4.97 percentage points higher. The increased food prices were attributed to planting season and logistic costs as impact of fuel subsidy removal took its full course. Notably, the most substantial price increases were observed in gas, air passenger transport, liquid fuel, vehicle spare parts, and fuels, lubricants for personal transport equipment, medical services, and road passenger transport.In the same vein, the core inflation also moved up from 20.06 in June to 20.47 percent in July. There was a 4.41 percent increase in the core inflation over the period of one year, from 16.06 percent in July of 2022.
The continued surge in sub-indices of inflation shows that Nigeria’s inflation is more than transient but structural in nature. It appears evident that the continuing inflationary pressure experienced in the country is attributable to the fallout of recent government policy and measures, including removal of fuel subsidy and the unification of exchange rates. Additionally, concerns about increasing energy costs and widespread insecurity in food-producing regions are exacerbating the inflationary pressures. According to the report signed by the Director General of the association, Mr. Ajayi-Kadiri, mni, the current inflationary condition in Nigeria is adversely affecting the operation of the manufacturing sector, just like most other sectors of the economy through Increased cost of production, as rising inflation often leads to higher costs of raw materials, labour, and other production inputs. Manufacturers often find it more expensive to procure resources necessary for their production processes, thereby squeezing profit margins.
As costs increase due to inflation, manufacturers struggle to pass on these cost increases to consumers in the form of higher prices which results in reduced profit margins, especially as it is becomes more difficult to pass the burden to consumers, leading to price resistance.resulting from income squeeze. Moreover, the rising Inflation disrupts the supply chains, making it difficult for manufacturers to obtain necessary materials and components. This leads to delays in production and potentially halt operations as key supplies become scarce or unavailable. Others are uncertainty in planning and reduction in consumer spending.
Consequent upon the foregoing, the association which observed that the high inflation is a significant sign of underlying macroeconomic weaknesses, warned that’ neglecting to tackle the underlying causes will exacerbate constraints on economic expansion and elevate the unemployment rate within the country. It acknowledged that addressing inflation is a complex and long-term endeavor that requires a coordinated effort from various stakeholders, including the government, Central Bank, private sector, and civil society.
A combination of these factors, MAN insists can help mitigate inflationary pressures and promote sustained economic growth. Some of the ways that will ensure effective and conducive operations of manufacturers in the Nigerian economy includes: Striving towards a stable exchange rate. This is crucial to controlling inflation. The CBN should implement effective exchange rate policies that prevent sharp depreciation of the currency, which has continued to lead to imported inflation. Also, addressing the problem of free fall of Naira in both official and parallel markets by improving liquidity in I&E window as well as employment of collaborative fiscal policy measure through budgeting and effective taxation to complement the monetary policy actions taken by CBN.
Other measures are increased targeted support to the agricultural sector to enhance productivity, reduce reliance on imports and stabilize food prices.Formulation of policies that promote a stable and conducive business environment which can attract both local and foreign investments, leading to increased production, job creation, and ultimately, stability in prices; effective communication with the public and stakeholders about the government’s commitment to controlling inflation can help manage inflation expectations, which can influence price-setting behavior
MAN maintains that addressing the challenges of insecurity, deploying fiscal reforms that prioritize productivity and intensify infrastructural development to stimulate economic activity, create jobs and improve living conditions. Implementing structural reforms that enhance transparency, reducing bureaucracy and improving the ease of doing business as important ingredients needed to contain inflationary trends in the country.
