BY ONOME AMUGE
Nigeria’s economy may be headed for stagflation driven by the high cost of diesel and foreign exchange volatility, as well as insecurity worries, rising cost of business operations, and stagnation in the nominal income of many Nigerians amid higher levels of domestic inflation in the country.
Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE), noted this in a recent statement titled “Rising Inflation in Nigeria and the Need for a Productive Economy”.
Stagflation, according to the Corporate Finance Institute, is an economic event characterised by a high inflation rate, slow economic growth and high unemployment figures.
Nigeria’s inflation rate surged to an 11-month high of 17.71 percent in May 2022 from 16.82 percent in April, data from the National Bureau of Statistics (NBS) show.
Yusuf, a former director-general of the Lagos Chamber of Commerce and Industry (LCCI), described the federal government’s borrowing from the Central Bank of Nigeria (CBN) through Ways and Means, which currently stands at N19 trillion, as disturbing and a violation of the CBN Act.
The CPPE CEO further corroborated the recent report by the World Bank that one million additional Nigerians would slip into the poverty index by the end of 2022.
According to him, the projection by the international financial institution is a “no-brainer” given that the nation is on the brink of stagflation.
He said the nominal income of many Nigerians has stagnated, while others do not have any source of income.
“The exchange rate is also a major concern as the naira is weakening daily, while insecurity adversely affects production, especially in the agriculture sector,” he said.
Yusuf said urgent steps are needed to address the problems that are significant drivers of domestic inflation.
In this regard, he suggested that Nigeria needs to adopt investment-friendly policies to attract more foreign direct investments (FDIs) into the economy, emphasising that the foreign exchange market must be reformed to be market-driven.
Yusuf tasked the fiscal policy authorities to review the current tax policy to make it more accommodating and ease the burden on income earners and businesses. He also made a strong case for reforming the Customs Office to make it an enabler of business activities, not revenue generation.
He called on the government to accelerate the refineries’ rehabilitation and support the Dangote Petrochemical Refinery complex to boost revenue and increase the country’s employment rate.
