MAN Decries High Inflation Rate Says Is An Evidence of Declining Economy
Manufacturers Association of Nigeria (MAN) has expressed anxiety over the upward swing of inflation which it says will worsen the Nigerian economy, portending difficult times for consumers and the manufacturing sector at large.
Inflation in Nigeria swung to 18.6 per cent in June, and MAN said this signal macroeconomic inadequacies and failure.
The association hence urged the government to address the contributory factors to prevent further limitations of economic growth and increase of unemployment in the country.
Economic growth has dipped to 3.11 per cent in the first quarter of 2022 from the 3.98 per cent economic growth of the fourth quarter of 2021. Nigeria recorded 5.1 per cent growth in the second quarter of 2021
National Bureau of Statistics(NBS) two years ago put the unemployment rate at 33 per cent. The rate may have dipped further in post Covid-19 era.
The country inflation had peaked at 18.72 per cent peak in January 2017 and Director-General of MAN, Segun Ajayi-Kadir is worried that the 18.6 per cent rate in June is a gradual journey towards the 2017 peak.
National Bureau of Statistics (NBS) in it’s latest report on inflation said headline inflation rate increased on a month-to-month basis to 1.82 per cent in June 2022, signifying 0.04 percentage point increase above the 1.78 percent recorded in May 2022.
NBS attributed the surge in headline inflation to increase in prices of gas, liquid fuel, solid fuel, garments, passenger transport by road, cleaning, repair and hire of clothing, and passenger travel by air, meat, bread, cereals, fish, potatoes, oil, fat, wine, yam and other tubers.
MAN however, noted that the causes of inflation rise in Nigeria, includes seasonality, insecurity, food shortages, shortfall in the supply of raw materials for production of food related products, fertilizers and others, which is not available locally.
MAN helmsman these will impact on the sector, prompting increase in the cost of production inputs with effects on capacity utilization, inventory and profitability of manufacturing firms, higher MPR and Lending Interest Rate, which will further constrained access to credit and increase the cost of borrowing for manufacturers, especially those in the SME’s cadre and upward swing in the value of shares for manufacturing concerns listed on the stock exchange.
On the consumers’ side, inflation will affect the purchasing power and cause reduction in demand for manufactured products leading to poor sales and turnover, lower competitiveness as the high inflation rate further mount pressures on the already very high-cost operating environment, which may hinder the prospect of beneficial trade in the region and the continent.
Other effect include- further loss in the value of the Naira, increase the tempo of hoarding dollars, deepening of downward swing of export earnings, which of course will worsen the forex challenge in the country and closure of more companies as the capacity to meet obligations to internal and external stakeholders is greatly impaired.
Ajayi-Kadir stated, “MAN, strongly believe that high inflation is a major indication of macroeconomic inadequacies and failure to take steps to address the contributory factors will further limit economic growth and increase the rate of unemployment in the country. By reducing purchasing power, high inflation reduces aggregate demand and limits production which eventually result in a fall in employment.”
On the flip side, the MAN DG added, “It will escalate the value of public debt servicing expenditure due to the exchange rate pass-through effect in the face of increase in fuel subsidy cost and rising global oil prices.
The resultant effect is lesser resources for public investment expenditure needed to catalyze and sustain economic growth.”
On the fuel scarcity, he said the nationwide fuel scarcity witnessed in June is largely responsible for the rise in inflation. “The fuel scarcity necessitated further hike in energy prices, particularly prices of diesel, aviation fuel and petrol, which all had trickled down effects on the cost of food, manufactured products, other commodities, transportation and accommodation nationwide. Most notably, the price of diesel has spiked by about 230 per cent in the last one year.”
Source: Insidebusiness