The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) said the Nigerian economy is suffering stagflation rather than inflation.
Reacting to the inflation rate of 20.52 per cent reported by the National Bureau of Statistics (NBS), it said, “According to trading economics, this newly recorded figure exceeded market expectations of 20.25 percent, making it the highest figure recorded in the country since September 2005. Although these inflationary statistics might be incorrectly underestimated, considering the primary research on the prices of essential food, transportation and household goods.
“The seventh consecutive monthly increase since February, indicating a 3.52 percent increase when compared to the August 2021 inflation rate of 17.01 percent. Food inflation also increased to 23.12 percent in August 2022, a 1.1 percent increase from the 22.02 percent recorded in July 2022.” NACCIMA stated.
The leader of the Organised Private Sector (OPS) pointed out that a number of factors contributed to the increase in inflation, explaining that the high cost of raw materials, the devaluation of the naira and the disruption of the supply chain caused by insecurity, amongst others were responsible. The Association pointed out that the persistent insecurity in the nation has continued to impede agricultural activities and deter investments in agriculture in the nation’s food-producing regions, resulting in a decline in agricultural output.
“As a result of the war between Russia and Ukraine, the worldwide inflation rate has increased, which has led to an increase in the price of oil and food. This made it difficult for not only those with low incomes but for those with middle incomes to afford necessities. Nigeria’s dependence on these countries for agricultural commodities such as grains and wheat for direct consumption and industrial commodity production has had a significant effect on food prices.
“Due to the invasion of the Ukraine, the country’s imports are inadequate to meet the expanding demand for daily consumption products, as Nigeria, along with other African nations, historically relied on wheat imports from the Ukraine.
“In 2021, Nigeria imports around 98.5 percent of the required quantity, leaving Northern states with a production capacity of 1.5 percent. Even though wheat matures in only 150 days and can be cultivated on all soil types except for severely damaged alkaline and waterlogged soils, the security situation in the country has impeded Nigeria’s potential to improve production.
“The rising level of insecurity has a direct effect on the production capacity of most farmers, with Nigeria having over 80 percent of the farmers to be smallholders. These farmers are unable and frightened to do their normal farming due to the security situation in the country, despite the fact that these individuals make a living from farming and contribute significantly to the country’s food supply. In addition, they contributed to the provision of raw materials for food processing and for majority of agro-allied businesses. The same impact poses a greater threat to rural-to-urban conveyance of agricultural products. Consequently, the entire agricultural value chain has been disrupted due to the restrictions imposed by insecurity. It is conceived that the primary cause of inflation, particularly food inflation, is endogenous.
“Similarly, the present global increase in fuel prices and the resultant increase in diesel prices have a direct impact on the prices of goods produced with petroleum products. Notably, increased transportation, manufacturing, and heating costs have indirect implications on the cost of goods. It is increasingly crucial for most manufacturing enterprises to consider energy cost efficiency and become more reliant on alternative energy for production.”
NACCIMA regretted that most farmers and those earning a living within the value chain have been left unemployed, worsening the spiraling unemployment rate in the country, adding that Nigeria is currently suffering stagflation rather than inflation.
The trade body urged government to develop and implement policies targeted at increasing food supply and decreasing enterprises’ production costs.
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