FX liquidity challenges fueling Nigeria’s high inflation- CPPE

The Centre for the Promotion of Private Enterprise (CPPE) stated that liquidity challenges in the forex market are among factors contributing to Nigeria’s high inflation rate.

Nigeria’s inflation rate dropped marginally to 15.6 percent in January 2022, representing a reversal from the uptick recorded in the previous month, when it increased to 15.63 percent in December 2021.

It would be recalled that the consumer price index, which measures the rate of increase in the price of goods and services, rose to 15.60 percent year-on-year in January 2022.

According to data released by the National Bureau of Statistics on Tuesday, this is 0.87 percent points lower than the rate recorded in January 2021 (16.47) percent.

READ ALSO: CBN plans to unveil new FX bidding regime

However, in a report titled, “CPPE COMMENTS ON JANUARY 2022 INFLATION REPORT, signed by its Chief Executive Officer, Dr. Muda Yusuf, the CPPE stated that although the economy recorded a marginal decline in headline inflation in January, high inflationary pressures continue to be a major worry to stakeholders in the Nigeria economy.

Muda stated that the key driver of inflation is exchange rate depreciation which has a significant impact on headline inflation, especially the core sub-index. Also, liquidity challenges in the forex market affect access to manufacturing and other inputs amongst others.

The CPPE boss said to contain inflation, the federal government needs to manage insecurity, minimize fiscal policy deposit monetisation and establish an investment friendly tax climate.

READ ALSO: No respite for Naira one month after Aboki FX shutdown

“Government must also address concerns around high energy cost, reduce import duty on intermediate products and raw materials for industries to reduce production costs. They must also ensure the restoration of normalcy and good order at the nation’s ports to reduce transaction costs and manage climate change consequences to reduce flooding and desertification,” he said.

Some of these, he added, include exchange rate depreciation, liquidity issues, security concerns, climate change, and expensive energy and transportation costs.

Others, he added, were structural impediments affecting agriculture value chain, monetisation of fiscal deficit, high import levies, exorbitant charges at the ports, and aggressive revenue drive by government agencies.