Experts Canvass Cheap Funds High Production To Cripple Inflation
As the inflation rate tapers off, even as food prices skyrocket, analysts have again canvass the establishment of low interest rate intervention fund for the real sector as a sure way out of the high cost of living in the country.
For instance, one of the analysts, Mr. Rislanudeen Mohammed, a former Managing Director of Unity Bank Plc, firmly believes that both the cost of production and those of goods and services will reduce if there is an effective and sustained low interest rate intervention fund to support the manufacturing sector, especially small and medium enterprises.
Recall that the National Bureau of Statistics (NBS), in its latest Consumer Price Index (CPI) released last week, said that food price index showed a marginal rise of 0.7 per cent at 20.32 per cent in September, up from 20.25 per cent in August, even as annual inflation rate slowed to 15.98 per cent.
However, to achieve an all-round inflation reduction, Mohammed said:
"The government must build an effective and sustained low interest rate intervention fund to support the real sector especially Small and Medium Enterprises(SMEs), so that the cost of production and by extension, the prices of goods and services will reduce. The Central Bank of Nigeria’s role is needed too as it needs to be more transparent inits management of the floating exchange rate system as this will support the already improved liquidity, stabilize the exchange rate system and reduce the cost of doing business. This will, in a way, bring down the current unbearable prices of goods and services."
Speaking in the same vein, the Director General of the Institute of Management Consultants (IMC), Prof. David Iornem said the best way to bring down inflation rate and a corresponding crash in food prices was for the country to increase its investment in the local production of food and beverages consumed in the country.
He said the continuous importation of consumable items would not assist ongoing efforts to bring down inflation.britannica.comyohaig.ng</a> The key, he explained, was to be found in boosting local farming and processing of consumable goods in the country. The federal, states, and local governments have to make it a policy to ensure that locally produced goods and services are patronised. He said the government should do all within its powers to ensure that there are off-takers for farmers. That way, farming will become profitable and attractive for investors and also contribute more to the country’s GDP.
Said Iornem,"It is a question of demand and supply. When you continue to have less goods being chased by more money, then inflation won’t go down. We have to produce more foods, more of the things that we consume in the country has to be produced in large quantity for the market.
"We have to assist farmers with inputs, they need chemicals, fertilizers, improved breeds to improve their production capacity for the local market. Because any imported item has an additional cost that comes along with it, we have to do everything to cut down onimports. This is the key to easing inflation."
The Coordinator, Agribusiness Community of Agricultural Stakeholders of Nigeria , Mr. Sotonye Anga,noted that the NBS statistics on the annual inflation rate’s coming down did not emanate from the reality on the ground. He said economic activities could, however, be jumpstarted if small and medium entrepreneurs laid their hands on cheap funds.
Hear him: "Yes, inflation rate is coming down, but the reality on the ground to the market woman, to the market man, to the man in the street, shows that the cost of living is still high and the price of foods and other items are high. We need to create that balance so that the cost of food can significantly come down, which is the kind of balance Nigerians will want to see.
"Basically, what the Federal Government need to do now is to deliberately ensure that we create more economic activities by getting more people to access credit so that we will be able to engage meaningfully in producing food and other things. When you find more people engaged in agribusiness to produce enough food, you will realise that there will be food increase, that simply again will drive down cost because, when you produce more food and it is effectively distributed from the farm gate to those areas where the people will take them, prices of food will come down."
Anga who is also the National Secretary, National Cashew Association of Nigeria (NCAN), said if Nigerians could buy food for less (price), they would be able to eat better; the country would have a healthier population, stronger people and that would be in the best interest of the nation.
"That on its own will reduce a whole lot of the tension we are facing now; it will also significantly support that balance in the inflation rate coming further down while creating more jobs for the people because, looking at it, more people are unemployed. So we need to get more people to be engaged economically and productively in the interest of the country."
Some experts picked holes in the NBS data that inflation has tapered.They noted that businesses generally have not refected that since people’s purchasing power is still low.
According to Mr Emeka Oguchi, Managing Director of Pointek, things are no longer at ease as market situation is not helping anyone.
"Everyone knows the implication of such a thing (inflation coming down). Currently people are still finding it very difficult to survive. It is also affecting business because turnover for sales have drastically gone done. The truth is that things are no longer what it used to be".
Corroborating this, the President of Computer and Allied Products Dealers Association, CAPDAN, Mr Ahmed Ojikutu, said it sounded ironical to say that inflation has stopped. "Well, there is no much impact of that on our businesses even as we all know thatComputer Village is the highest hub in West Africa. People are trying out of their ingenuity to create wealth and it is not that easy. Government should further intervene so that people can be relieved at the end of the day."
However, a development economist, Mr Odilim Enwegbara did not see anything bad in high inflation in as much as the country is exiting recession.
He said that, even if inflation is as high as 20 per cent, there is still nothing wrong about it because the nation is spending on infrastructure.
"High inflation rate is not necessarily bad for a dynamic and emerging economy. This is especially for recessionary economies like ours or economies in the process of exiting recession since the only way to exit recession is for the government to spend its way out.
"At or below 20 per cent inflation rate, there is no any cause for alarm since that is still within a healthy inflation rate. This is specially if government is massively spending on critical infrastructure or on social welfare programmes, programmes that aim at putting more money in the hands of the poor. Not only to improve their purchasing power but also to mainstream them into the economy.
That is why such high inflation rate is not only healthy but also is needed for economic growth since both improve the demand and supply sides of the economy.
"The only problem in our own case is that the current inflation is caused by big government and high cost of imports.
So, until we begin to produce most of what we consume by diversifying the economy there’s no way we should expect to have a healthy inflation, the kind of inflation that makes imports so expensive to have most imported consumer goods priced out of our consumer market, which makes locally made goods cheaper and competitive.
For Badayi Sani who is a professor in Bayero University, Kano, for inflation to come down to a single digit, certain steps must be taken which are critical before Nigeria will witness a single inflation digit.
"Before inflation can be reduced to a single digit, there must be a chain in the productive sector. Import dependent of the Nigerian economy must be addressed radically before Nigeria will witness a single digit..
There are three components that must be addressed. The first one has to do with goods that are imported.
The second component has to do with goods that use the subvention part of the input from imported sources.go.comyohaig.ng</a> Those are goods that are imported in Nigeria but use subvention part of the input.
‘Third component are goods that are sourced locally but suffer from supply bottlenecks because of lack of advanced technology which could make them available as and when due.. That also impacts on inflation. So, these three things must be addressed before we witness a single digit inflation" he said.
Just last Tuesday, the NBS, in its latest CPI publication, announced that the country’s annual inflation rate had marginally slowed for an eighth month in September, easing to 15.98 per cent.
This was 0.03 per cent points lower than the rate recorded in August (16.01 per cent), making it the eighth consecutive decline in the rate of headline inflation, year-on-year, since January.
However, the food price index showed a marginal rise at 20.32 per cent in September, up from 20.25 per cent in August.
"The rise in the index was caused by increases in prices of potatoes, yams and other tubers, milk, cheese and eggs, bread and cereals, coffee, tea and cocoa, soft drinks, fish, meat and oil and fats," the NBS said.
Increases in price index for some commodities were recorded in all divisions that yield the headline index. On a month-on-month basis, the headline index increased by 0.78 per cent in September , 0.19 per cent points lower than the rate of 0.97per cent recorded in August.
The percentage change in the average composite CPI for the 12-month period ending in September over the average of the CPI for the previous 12-month period was 17.17 per cent, showing 0.16 percent point lower than the 17.33 per cent recorded in August.
The Urban index rose by 16.18 per cent (year-on-year) in September, up by 0.05 per cent point from 16.13 per cent recorded in August, while the rural index increased by 15.81 per cent in September, down from 15.91 per cent in August.
On month-on-month basis, the urban index rose by 0.84 per cent in September, down from 0.99 per cent recorded in August, while the rural index rose by 0.74 per cent in September, down from 0.95 per cent in August.
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