Instituting measures to stimulating economy amid rising inflation
Policy measures to address the demand and supply shocks will help check the nation’s rising inflation rate as well as stimulate the economy ahead of possible recession, the Nigeria Employers Consultative Association (NECA), has said.
The employers’ body noted that there are limitations to the successes that could be recorded when demand shocks are combined with supply shocks.
On the group’s position on rising inflation as recently released by the National Bureau of Statistics (NBS), its Director-General, Timothy Olawale, noted that it is already apparent from the emergence of the current crisis that there are implications on the economy from both the demand and supply sides.
Some of the demand factors, he said, include social distancing with consumers, staying at home, limitations in spending, and declining consumptions.
On the supply side, he noted that factories are shutting and cutting down production and output, while in other instances, staff work from home to limit physical contact.
He maintained that early containment of the spread of the coronavirus and resumption of economic activities, coupled with various fiscal and monetary interventions by the authorities are quite remarkable.
Olawale, while acknowledging that the conventional policy measures currently being taken such as reducing interest rates and costs of borrowing, tax cuts and tax holidays are remarkable, however argued that they are not quite potent when there are demand shocks.
Following the release of the March 2020 Consumer Price Index, the inflation rate has increased by 0.06 per cent from the February level to 12.26 per cent rising for the eight consecutive month, and the highest inflation rate the country had seen in 23 months.
NECA argued that rising inflation added to the current lockdown and closure of businesses, recession looms in the economy amidst the rapid spread of the COVID-19 pandemic.
“The COVID-19 pandemic has forced lockdown all over the world, including Nigeria, with governments ordering their citizens to stay at home to prevent further spread of the virus.
“This is a global pandemic, which has led to cancellation of several local and global events, sharp drop in crude oil prices, uncertainty in financial markets, collapse in air travel requests and global manufacturing and supply chain disruptions, among others. This has caused disruption in economic activities, and in effect pushed up prices of food and essential items,” NECA said.
Similarly, the Deputy General Secretary, the United Labour Congress (ULC), Chris Onyeka, attributed the rising inflation to the erosion of workers income, while savings had become steeply negative; meaning that life and living in a few months from now will be brutish for Nigerians, if nothing was done.
He said the whole world is under severe inflationary pressures, induced by COVID-19, as such rising inflation in Nigeria would not be any different.
Noting that the consequences are many and varied, he said: “Ours would be more difficult given that our economy is seriously exogenously determined. What this means is that global fluctuations and macroeconomic situations such as the current tight foreign exchange situation, the falling oil prices, and the unfortunate lack of commitment to buying made-in Nigeria goods exposes Nigerians to deeper inflation.”
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