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Experts warn of looming job losses over galloping inflation

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Inflation
Job losses loom as a consequence of the current galloping inflation in the country, financial experts yesterday warned the Federal Government.

The soon-to-be expected lay-offs have been projected to start from consumer products’ companies and could also happen from this month onwards, as uncertainty over petrol prices and availability persist.

For the third consecutive month, reports from the National Bureau of Statistics (NBS), yesterday, showed that lingering structural and macroeconomic constraints resulted into further increase in the inflation from 12.8 per cent to 13.7 per cent.

Leading the surging index’s variables are electricity rates, kerosene prices, the impact of higher petrol prices and vehicle spare parts as largest contributors.

“These items as well as, other imported items continued to have ripple effects across many divisions that contribute to the core. The Index increased by 13.4 per cent in March, roughly 1.2 per cent points from rates recorded in March,” NBS said in the statement.

An investment banking firm, Eczellon Capital, in a note to The Guardian, said that the rising inflation has two basic implications for businesses and individuals.

“It will drive up the cost of borrowing for the government, which will manifest in form of higher yield on government securities as investors will demand higher returns to cover the risks associated with the new inflation status.”

“The value of the Naira worsened last week at the parallel market on the back of heightened demand from oil marketers, who would invade the segment in search of the forex. This is likely to remain in coming weeks due to inadequate forex supply.

“The upcoming Ramadan fast billed to commence in early June is typically associated with higher prices of food, pushing consumer prices further high,” the Associate Research at Eczellon Capital Limited, Mustapha Suberu, said.

“We believe that a more sustainable approach would be a comprehensive review of the nation’s foreign exchange policy to allow for adequate flexibility in the pricing of the naira,” he added.

Afrinvest Securities Limited noted that insisted policy inflexibility in forex market still constitutes a burden to importers and the approval granted marketers to source forex at secondary markets could pressure rate further at the parallel market.

All these factors, the experts concluded could force companies, which would normally want to stay afloat by reducing their work force.


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