Rising Inflation: LCCI challenges FG to address supply side challenges

The Lagos Chamber of Commerce and Industry (LCCI) has urged the Federal Government to address issues affecting the supply side of the Nigerian economy to deal with the rising inflation.

According National Bureau of Statistic (NBS) released inflation data for March 2021, “The consumer price index, (CPI) which measures inflation increased by 18.17 percent (year-on-year) in March 2021. This is 0.82 percent points higher than the rate recorded in February 2021(17.33 per cent).

“Increases were recorded in all Consumer Individual Corruption by Purpose (COICOP) divisions that yielded the Headline index. On month-on-month basis, the headline index increased by 1.56 per cent in March 2021.”

“The NBS noted that on a month-on-month basis, the urban index rose by 1.60 per cent in March 2021, up by 0.02 compared to the rate recorded in February 2021, while the rural index also rose by 1.52 per cent in March 2021, up by 0.02 compared to the rate that was recorded in February 2021 (1.50 per cent).

The report said “the corresponding twelve-month year-on-year average percentage change for the urban index is 15.15 percent in March 2021”.

According to the NBS, this is higher than 14.66 per cent reported in February 2021, while the corresponding rural inflation rate in March 2021 is 13.99 per cent compared to 13.48 percent recorded in February 2021.

The report said increases were recorded in all COICOP divisions that yielded the headline index.

The report reads in part: “The percentage change in the average composite CPI for the twelve months period ending March 2021, over the average of the CPI for the previous twelve months period was 14.55 per cent, representing a 0.50 per cent point increase over 14.05 percent recorded in February 2021.

“The urban inflation rate increased by 18.76 per cent (year-on-year) in March 2021 from 17.92 per cent recorded in February 2021, while the rural inflation rate increased by 17.60 percent in March 2021 from 16.77 percent in February 2021.

“The composite food index rose by 22.95 per cent in March 2021 compared to 21.79 percent in February 2021”.

Reacting to the report, The Director-General (LCCI) Dr Muda Yusuf pointed out that the supply-side constraints including forex illiquidity, transport and logistics cost, currency depreciation, agriculture-related insecurity and others were the driving forces behind the rising inflation.

According to him, “The March headline inflation of 18.17% is the highest in four years and more worrisome is that food inflation has accelerated to 23 %. The major issues are cost and output related. It is not in all cases that high production and operating costs can be passed on to the consumers.

“The implication is that producers are also taking a hit and this is more severe where a product or service is faced with high demand elasticity. Tackling inflation requires urgent government intervention to address the challenges bedevilling the supply side of the economy.

“There is also a need to worry about the growing fiscal deficit, especially the Central Bank of Nigeria financing of the deficit. It is characterized as inflation tax by a school of thought in economic literature,” he added.