” The 18.17 percent inflation rate in the country is not healthy for the well-being of the people and the growth aspiration of the economy. It should therefore be properly managed before it spirals out of control. “
With these words, the Manufacturers Association of Nigeria (MAN), called on the federal government to take urgent action to intentionally ensure price stability before the situation becomes deplorable.
” The news of rising inflation in a country that is only recovering from a recession is worrisome. It is more so for the manufacturing sector that remained in recession, even after the technical exit of the country’s economy,” said Segun Ajayi- Kadir, the director-general of MAN.
How inflation affects manufacturing
He said that the current inflationary condition in Nigeria adversely affects the profitability of the manufacturing sector and is partly responsible for its competitiveness.
” As you are probably aware, the manufacturing sector posted a growth rate of -1.51 percent in the Q4 2020 from -1.52 percent in Q3 of the same year. The latter being a major contributor to the low-export penetration of goods manufactured in the country into the international market,” he said.
MAN, he said, therefore, calls on the government to pursue consumer price stabilization measures that will:
Stimulate growth in agricultural output
Deliberately support the manufacturing sector to guarantee an improved output that can engender the reduced intensity of too much money chasing after fewer goods.
further, diversify the country’s revenue sources.
action a CBN sustainable plan to improve the external reserves to a defensive capacity that will raise the months of imports of Nigeria to a dependable level. This can be achieved by deliberately and sincerely partnering with the productive sector to grow non-oil export.
The Federal Ministry of Finance (FMF) and CBN should work more closely when designing policies that affect the real sector of the economy.
This is to prevent a situation where policies are working at cross purposes. For instance, while CBN was creating funding windows at a single-digit interest rate to encourage production, Government increased VAT from 5% to 7.5%. Similarly, Government increased the minimum wage and also allowed an increase in the electricity tariff, and so on.
Government, in partnership with the manufacturers, should select strategic products, particularly those with high inter-industry linkage, for backward integration support and upscale the drive for the resource-based industrialization agenda
Give priority allocation of forex to manufacturers to import inputs that are not locally available and for which there are no immediate plans or resources to produce locally. Since policies are dynamic, they could change as soon as we develop local capacity.
Also, there are quite a several moribund industries in the country. There should be an industrial clinic to engender their resuscitation to boost output and ultimately achieve price reduction.
There is a strong relationship between manufacturing sector growth and inflation rate, just like exchange and interest rates.
Therefore, the immediate government should assist manufacturing productivity with credit at a competitive price. This could be in the form of enhancing existing special credit windows or creating additional ones for this important sector of the Nigerian economy.