The Lagos Chamber of Commerce and Industry (LCCI) has suggested that the Central Bank of Nigeria (CBN) should temporarily halt interest rate increases as a measure to alleviate the supply-side pressures contributing to inflation. This recommendation comes in response to the recent inflation report indicating a rate of 25.80%.
According to a statement by Dr. Chinyere Almona, the Director-General of LCCI, a pause in interest rate hikes could help address the factors affecting inflation, particularly on the supply side.
The LCCI’s proposal, which also urged the federal government to implement prudent fiscal policy measures, highlights the need for a balanced approach to monetary policy to manage inflation and support economic stability.
According to the statement, the LCCI anticipates that businesses will adopt various cost-reduction strategies to mitigate the impact of inflation on their operations.
Businesses operating in Nigeria are expected to implement additional cost-cutting measures in response to the escalating inflation. This could involve reducing their workforce through downsizing and intensifying efforts to source raw materials locally.
Such strategies are driven by the need to control expenses and navigate the challenges posed by increasing inflation, which can erode profit margins and financial stability for businesses in the country.
These strategies may include downsizing and seeking local sources for input materials in order to manage operating expenses and sustain profitability in the face of rising inflationary pressures. This reflects the challenges businesses may face in maintaining their financial health and competitiveness in an inflationary environment.
Dr. Almona said that households’ real income would continue to experience a decline, especially in the near term, citing the business lobby group is concerned about the uptick in inflation (year-on-year) driven by the increase in both the food and core components of the CPI and also the indication that the path of price movements remains unclear in the near term.
She added that the inflationary shocks have created a need for the government to give tax breaks on basic food items.
“The Lagos Chamber of Commerce and Industry recommends government implement prudent fiscal policy measures.
“This is particularly in terms of borrowings as well as addressing the challenge of food inflation by immediately reducing and removing the tax on basic food items to protect the most vulnerable,” she said.
Nigeria’s inflation rate has seen a spike following new economic reforms introduced by President Bola Tinubu. The reforms include fuel subsidy removal and the floating of the Nigerian forex market. Inflation, led by the rising cost of foods and beverages, surged to 25.80% in August 2023, 1.72% points higher than the 24.08% recorded in July.
The LCCI also called for measures to alleviate the impact of escalating inflation on consumers. The organization called on the government to provide palliatives to help mitigate the effects of inflation, which include higher living costs and reduced purchasing power for individuals.
Additionally, the LCCI has advocated for a temporary halt in interest rate hikes as part of the strategy to address inflationary pressures and promote economic stability. These recommendations are expected to provide relief for both businesses and consumers in coping with the challenges posed by inflation.
“We implore the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents.
“Furthermore, we urge the Central Bank of Nigeria (CBN) to pause interest rate hikes to relieve the pressures on the supply side, especially at this time,” she said.