MAN expresses concerns over rising inflation, wants FG to arrest trend

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Manufacturers Association of Nigeria has expressed concerns over the increasing rate of inflation rate, saying it could further worsen unemployment and limit the nation’s economic growth.

The association was reacting in a statement to the recent data released by the National Bureau of Statistics for June 2022 which put the inflation rate at 18.6 per cent indicating a further rise of 0.85 percent point from 17.75 recorded in the corresponding period of 2021.

MAN noted 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.

It stated that apart from reducing purchasing power, high inflation equally reduces aggregate demand and limits production which eventually result in a fall in employment.

“On the flip side of the coin, 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,” it added.

In order to avert the earlier mentioned negative trickle-down effects of high inflation on the economy and the manufacturing sector, MAN recommended a number of measures to the taken by the Federal Government.

It advised the government to deploy a bouquet of supply-driven policies back with more structural measures to combat the peculiar inflationary pressures from insecurity, energy and transport cost.

MAN called for the further reduce of reliance of the country on imported products and raw materials by encouraging local sourcing through a comprehensive and integrated incentivized system “since Nigeria is largely bearing the brunt of imported inflation.”

It also wanted the government to intentionally resolve all forex- related challenges confronting the productive sector by making a detour from the CBN’s foreign exchange regime that greatly contradicts one of the goals of the National Development Plan, which seeks to attain quick convergence of the foreign exchange rates.

“The government must sustain effort at improving infrastructural developments and ensure are economically- driven to reduce susceptibility to externally-induced inflation, as adequate provision of infrastructure in strategic hubs reduce operation and logistics cost and promote competitiveness.

“Accelerate the process of ensuring sustainable local refining of petroleum products by reactivating those currently quiescent, support the coming on stream of Dangote refinery and issue licenses for new refineries.

“This will clearly reduce the pressure of the foreign reserve and mitigate the vulnerability of the economy to the external supply shock that has resulted in energy crisis.

“Strategically position the oil and gas industry to benefit maximally from future interruptions in global supply that triggers increase in price of crude oil,” the association stated.

MAN said it is appalling that an oil-producing country like Nigeria is at a disadvantage at a time when global oil prices are rising, urging the government to strive to always meet the oil production quota set by OPEC, increase oil revenue and reduce budget deficit that has worsened inflation.

“It must also introduce favourable investment- oriented and security measures that will encourage private investment inflow into the oil and gas industry in order to pave way for the rehabilitation of the traditional full-scale refineries, develop the regulatory framework for the establishment of modular refineries,” it added.

Listing some of the top drivers of inflation,MAN said issues of insecurity, fuel scarcity, food shortages, shortfall in the supply of raw materials for production of food-related products, fertilizers and other inputs not available locally reared their ugly heads.

Stating its position on the recent increase in Monetary Policy Rate by the Monetary Policy Committee of the Central Bank of Nigeria that

deepened its contractionary monetary policy stance by increasing the MPR to 14% from 13%, which was fixed in May 2022, MAN noted that the increase in MPR has widened the journey farther away from the preferred single- digit interest rate regime.

The association argued that “It is not manufacturing friendly considering the myriad of binding constraints already limiting the performance of the sector.

“MAN is therefore concerned about the ripple effects of this decision and its implications for the manufacturing sector that is visibly struggling to survive the numerous strangulating fiscal and monetary policy measures and reforms.

Consequently, “the manufacturers are hopeful that the stringent conditionalities for accessing available development funding windows with the CBN will be relaxed to improve the flow of long-term loans to the manufacturing sector at single digit interest rate.

“The expectation is that MPC will ensure that future adjustments of MPR takes into consideration the trend of core inflation rather than basing decision on headline and food inflation.

This will no doubt shield the sector from the backlashes from the 14% MPR, ramp up production and guarantee sustained growth in the overall best interest of the economy.”

 

 

 

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