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Operators seek action on rising inflation from border closure

By Victor Uzoho
15 November 2019   |   3:32 am
Operators in Nigeria’s capital market have said that the decision of the Federal Government to shut the nation’s land borders is yielding positive economic results, They however, urged economic managers to check rising...

Closure of border at SEME post. PHOTO: AYODELE ADENIRAN

• Project 3% economy growth by 2020
• FCCP to boost investors’ confidence, ease market entry

Operators in Nigeria’s capital market have said that the decision of the Federal Government to shut the nation’s land borders is yielding positive economic results, They, however, urged economic managers to check rising inflation.

Though the Federal Government’s decision to shut the borders may have helped to address the smuggling of petrol and food products across the borders, in the short term, the experts expressed worry that unintended consequences were emanating and reflecting in the food inflation figures.

Citing reports by the government, the experts said though the development led to a reduction in Nigeria’s 56 million litres daily consumption of fuel, the price of local rice went up by 44 per cent, while vegetable oil went up by 30 per cent.

Specifically, Head, Research, Rand Merchant Bank (RMB) Nigeria Stockbrokers Research, Gbenga Sholotan, while speaking at the bank’s Private Capital Markets Business Breakfast Session, in Lagos, said that although the border closure is working in terms of boosting government revenue and foreign exchange, it could have unintended consequences as some food prices have begun to surge.

He said: “In September, inflation reversed its trend and started going up at 11.2 per cent and because food inflation was very high during that period, and food is about 50 per cent of the Consumer Price Index (CPI) basket, inflation might likely start going up again because of this border closure.

“We expect that there will still be growth in the Nigerian economy. By the end of this year, we expect that growth will be 2.2 per cent and will increase to about 3 per cent in 2020.”He maintained that the key drivers of growth on the economy would remain agriculture, telecommunications, and oil and gas sectors, which as a good part of the economy will continue to drive growth, adding that the increasing manufacturing utilisation would contribute positively to the growth of the Gross Domestic Product.

In his remarks, Chief Executive Officer, Rand Merchant Bank (RMB) Nigeria and Regional Head, West Africa, Michael Larbie, said Nigeria could be depriving herself of some foreign exchange as it has clients who export to neighbouring countries that are not able to export.

He maintained that although the aim was to prevent illegal goods from coming into the country, the government should be mindful of unintended consequences, as the countries involved are all part of the Economic Community of West African States (ECOWAS) and should have free mobility of goods and people.

Meanwhile, he noted that the on-boarding of the Federal Competition and Consumer Protection (FCCP) in the nation’s capital market would boost investors’ confidence, ease market entry, ensure fairness and eradicate fixed pricing.
“With FCCP on board, it’s good for competition. We’ve not had the monopoly act in Nigeria where we can shun big players who basically come and dictate the price of goods but with FCCP, it would give a kind of regulation where you won’t just come in the market and decide on the price you want to sell,” he added.

Earlier in his remarks, Director-General, Federal Competition and Consumer Protection, Babatunde Irukera, said transparency and price discovery are key to boosting investors’ confidence, noting that FCCP will instil regulations and carry out market oversight to ensure that investments are safe. He said the role of the FCCP authority is simply to enable a level playing ground for commerce, eliminate existing entry barriers and promote a more robust market, noting the need a regulatory framework that makes sure there is no existing active operation that welcomes monopoly.

His words: “The presence of FCCP in the market would make investments and market entry easier. I say so because there are certain industries you look at and you look at potential transactions and you say you won’t touch it but with balanced regulatory framework, you would be sure that there is a protection that companies that are struggling would survive.

“We have been finalizing the simplified guidelines to make sure that it has a local impact on Nigeria. I think the first approach is to first simplify the approach to combinations so that people can ride through that approach.”