The Centre for the Promotion of Private Enterprise, CPPE, has said the Nigerian Federal Government should peg the exchange rate for import duty at N1,000 per US dollar to tackle soaring inflation, which stood at 29.90 per cent in January 2024.
Muda Yusuf, the director of CPPE, disclosed this in a statement reacting to the January inflation figure.
The economic think tank noted that it will be difficult to tame Nigeria’s rising inflation if power supply challenges, logistics, and foreign exchange fluctuations are not addressed.
He added that the government needs to review its tariff policies by granting concessionary import duties on intermediate products for agro-allied industries and other industrialists.
“Persistent inflationary pressures in the Nigerian economy continue to be troubling, especially because of the acceleration effect on poverty and deterioration of citizens’ welfare. Purchasing power had continued to slump over the past few months.
“Headline inflation rose to an all-time high of 29.9 per cent in January as against 29.92 per cent in December. Food inflation maintained its uptrend, rising to a frightening high of 35.4 per cent in January as against 33.9 per cent in December. Economic growth may remain subdued while the risk of stagflation heightens.
“Regrettably, the major inflation drivers are not receding; if anything, they have become even more intense. These include the depreciating exchange rate, surging transportation costs, logistics challenges, forex market illiquidity, an astronomical hike in diesel costs, insecurity in farming communities, and structural bottlenecks to production.
“These are largely supply-side issues. The weakening of the naira against the currency of our neighbouring countries [CFA] had continued to incentivise the outflow of agricultural products to these countries. This is complicating the supply side challenges, especially of food crops.
“Elevated inflationary pressures also aggravate pressure on production costs, weaken profitability, erode shareholders’ value, and dampen investors’ confidence.
“Few producers or service providers can transfer cost increases to their consumers. The implication is that manufacturers and other investors are currently under tremendous pressure.
“Tackling inflation requires urgent government intervention to address the challenges bedevilling production, productivity, foreign exchange, and economic insecurity. The real sector of the economy needs to be incentivised to ensure moderation of production costs.
“The government needs to review its tariff policies by granting concessionary import duty on intermediate products for agro-allied industries and other industrialists. The same is true of investors in the logistics sector.
“The exchange rate benchmark for the computation of import duty should be pegged at N1000 per dollar. This is necessary to reduce the pressure of escalating costs of cargo clearing and minimise uncertainty in international trade processes. The policy choice of complete floating of the naira requires a rethink in light of the current inflationary outcomes, volatility, and market imperfections.
“The effects of high energy costs on economic activities are profound. It is very difficult to tame inflation if we do not fix power, logistics, and forex issues. Regrettably, there are no quick fixes in these areas. But it is important to prioritise these issues and ensure stability and recovery,” he said.
OsunDailyNG reports that headline inflation in January increased to 29.90 per cent from 28.92 per cent in the previous month.
Following the continued forex crisis, the Central Bank of Nigeria, CBN, readjusted the customs exchange rate from N1,444.56 to N1,481.482 per US dollar on Wednesday for the fifth time in 2024.
