Manufacturers groan under rising inflation
• Industrialists Proffer Way Out
• Seek Protection Of Local Industries
Latest Consumer Price Index (CPI) figure published by the National Bureau of Statistics (NBS) has revealed the limited policy options for the Central Bank of Nigeria (CBN) in managing an inflationary pressure characterized by cost. Can the economic managers address these concerns? FEMI ADEKOYA and CHUKA ODITTAH write.
For the fifth consecutive time this year, the Consumer Price Index (CPI) has continued to rise giving effect to the precarious situation Nigerians have found themselves with regard to the decrease in their purchasing power.
The National Bureau of Statistics (NBS) had announced last week that the CPI has reached 16.5 per cent in June from 15.6 per cent recorded in May, which further affirmed the present condition in which many Nigerians live, a reality that prices of goods and services are no longer affordable.
Specifically, the CPI, a measure of inflation, has been on the increase since February, when it rose to 11.4 per cent compared to 9.6 per cent in January.
For the months of March and April, the NBS had reported increasing rates of 12.8 per cent and 13.7 per cent respectively, while the 15.6 per cent recorded in May was 1.9 per cent points higher than the rate in April.
According to the NBS, the rise in CPI is largely attributed to supply-side factors notably high costs of fuel, electricity, transport, food and imported items.
Worried about this trend, members of the Organised Private Sector (OPS) noted that the current CPI is a huge cause for concern to industry players as patronage, turnover and profit margin outlooks become weaker.
The Lagos Chamber of Commerce and Industry (LCCI) noted that the unusual combination of slowing growth and rising inflation present a difficult policy challenge for economic managers.
Director-General of LCCI, Muda Yusuf noted that the character of the present inflation is more of cost-push inflation, arising from foreign exchange challenges, growing energy costs and logistics costs in terms of movement of goods and people.
He said: “the present inflationary trend is putting pressure on businesses as the cost of operations has risen, even though such costs can no longer be passed to consumers. Consumer purchasing power has been further weakened as businesses are producing for people who cannot afford it.
“It is a difficult situation at the moment. The foreign exchange crisis is already being handled and we are hoping that as situation stabilizes, inflows will be moderated and pressure may reduce.
“On the energy side, power supply needs to improve for producers to reduce their production costs. Scarcity of gas has put too much pressure on diesel price. A lot still needs to be done to assail the plights of Nigerians”.
On his part, Chairman, Nigerian Association of small-scale industrialists (NASSI) FCT chapter, Dike Prince Humphrey, said inflation affects every aspect of the nation’s economy.
“No aspect is left out. Small-scale industrialists are affected because cost of raw materials is high, so labour, and capital too. This is great disincentive for investment.
“No nation can make progress unless its economy is first of all taken care of. By this I mean that Nigeria is where it is today because we are not producing anything. We rely so much on import.
“For us to make progress the local manufacture of goods used here must begin and encouraged to thrive with proper policy positions. There is nothing anybody can do about the rising inflation in the country. It is because we are not producing enough. The little goods we produce are not being patronized. Nobody cares to give local manufacturers a chance.
“If there are industries, Nigeria will not be talking about rising inflation today. Today we have shortage of foreign reserve and the available ones we have are used to service import debts.
“The first thing Nigeria has to do to get out of economic mess and to prevent further inflation is to establish an industrial park or clusters for manufacturing. Without manufacturing, the economy cannot grow.
“The large-scale industries are at their level; good for the economy, but the small scale industries have direct impact on the lives and wellbeing of the people and the economy itself, because it has to do with the contributions of the low and medium income earners, who happen to be in the majority,” he added.
Until the federal government pays attention to development of local manufacturing, Humphrey noted that inflation rate would continue to rise.
“There are no two ways about it. Inflation comes about when there is few goods and high demand.
“Small scale manufacturers are not supported in anyway in this country, no matter the idea you have, you are just on your own. No infrastructure to build on. You can’t source loan anywhere to boost or start a business. Nobody cares about what you can offer. How can you grow a nation’s economy that way? You have an idea, but you don’t have a channel to market it to the people, so you have a situation where you have ideas but it dies inside and never sees the light of the day.
“Unless this country begins to pay attention to local manufacturers of most of the products we currently import, we are going nowhere, I’m sorry to say. The rate of inflation will naturally be going higher and higher”, Humphrey noted.
He added that government has to set up policies to enlighten people about manufacturing, noting that it is the solution to the nation’s economic challenge.
“The productive aspect of our nation’s economy rests on us small scale industrialists. We are ready to boost development of our nation’s economy, but the support we need in terms of infrastructure and others are just not there.
“We need to have industrial clusters where we can tap into the skills and proficiency of small-scale industrialists not only to provide empowerment for our youths but also produce goods to meet our local needs thereby saving foreign exchange. The neglect of local manufacturers industry is what is killing the economy of this nation and causing inflation,” he added.
President of Nigerian Statistical Association, Dr Mohammed Tumala explained, “Nigeria’s inflation trend is fueled by the appetite for foreign goods and services. The only way to curb the current rising inflation in the country is through attitudinal change. Nigerians must do away with the appetite for foreign goods. That means that we must develop alternatives locally and patronize them. It is not a question of going for a foreign alternative but deciding to promote local manufacture and encouraging them. This requires a lot of discipline.
“Many countries who had this problem, like China, came out of it through conscious policies and protection of local manufacturers.
“Many Nigerians are used to foreign products, especially those who can afford them. This needs to change. Government has to come up with policies to stimulate patronage of locally made products. In the area of standards, it is better to begin and perfect on standards or quality rather than rely on foreign products or services that push inflation high because of demand for foreign exchange that is not really there”.