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Experts lament high production costs as inflation hits 22.79%

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Experts have begun to lament as inflation rate in Africa’s biggest economy rises to a new 17-year high of 22.79 per cent in June 2023 from 22.41 per cent in the previous month.

The NBS report read, “In June 2023, the headline inflation rate rose to 22.79 per cent relative to May 2023 headline inflation rate, which was 22.41 per cent.

“Looking at the movement, the June 2023 headline inflation rate showed an increase of 0.38 percentage points when compared to May 2023 headline inflation rate.

“On a year-on-year basis, the headline inflation rate was 4.19 percentage points higher compared to the rate recorded in June 2022, which was 18.60 per cent.

“This shows that the headline inflation rate (year-on-year basis) increased in June 2023 when compared to the same month in the preceding year (i.e., June 2022).”

It noted that food and non-alcoholic beverages (11.81 per cent) led the list of items that contributed to the rising inflation figure.

The Experts had, however, said inflation needed to be tackled holistically.

A former President and Chairman of Council, Institute of Chartered Institute of Bankers of Nigeria, Prof Segun Ajibola, said Nigeria’s surging inflation needed to be curbed holistically.

Ajibola, who is also a Professor of Economics at Babcock University, said, “The fundamental problems are still with us. We have to face the issues squarely to address the problem of inflation.

“It requires a holistic approach. So many things have to be harmonised and so many things have to be tackled. Especially things that push costs of production and those that affect agriculture.”

Expressing optimism in the new administration to fight inflation, Ajibola said, “I believe things will be better going by the little we have seen. More expertise and more strategic policies will be initiated.”

Partner and Chief Economist at KPMG Nigeria, Dr Yemi Kale, recently said the net benefits of the subsidy removal were positive, but noted that there would be disruptions arising from a direct increase in energy prices, inflation rate, and transportation fares.

He said, “This disruption has an indirect impact on the increase in food prices and consumer demand. This is so because their purchasing power is weakened; consumer demand also shrinks unless the government provides some kind of relief to cushion the effect.

“In addition, households would begin to cut their expenditures, leading to businesses recording decreases in demand amid rising costs of operation increases. This is particularly going to affect the Micro-Small and Medium-sized Enterprises, and this would eventually birth lay-offs, hence increasing unemployment rate and insecurities.”

KPMG Nigeria said the removal of fuel subsidies in Nigeria could lead to a significant rise in the country’s inflation rate, potentially reaching 30 per cent in June 2023.

A report by KPMG said the removal, whether implemented entirely or partially, would cause a temporary inflationary surge.

The NBS, on its Twitter page, noted that the impact of the fuel subsidy removal and unification of exchange rates had yet to reflect on the country’s headline inflation, which justified the marginal increase.

“The June Consumer Price Index numbers may not fully capture the impact of the fuel subsidy removal and the unification of the exchange rate.

“This is because the data collection for computing the rate for the reference month typically stops around the middle of the month, meaning that the June numbers only reflect approximately two weeks of the policy impact on consumer prices.

“The full effect of the policy as relates to prices can, therefore, not be reflected in June only, but also in subsequent months, based on actual prices collected in market outlets across the country.”

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LCCI advocates discipline, export to sustain Naira appreciation

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LCCI advocates discipline, export to sustain Naira appreciationThe Lagos Chamber of Commerce and Industry (LCCI) has emphasised the importance of maintaining discipline in the foreign exchange market to sustain the steady appreciation of the Naira.

The President and Chairman of the Council of LCCI, Mr Gabriel Idahosa, made the call in an interview with newsmen on Wednesday in Lagos.

Idahosa praised the efforts of the Central Bank of Nigeria in imposing discipline, attributing the recent Naira appreciation to curbing speculative activities.

“On the monetary side, the CBN is doing it. The primary efforts should continue to impose discipline in the foreign currency market.

“The abuses in the foreign currency market were prevalent and most of the fall in the value of the Naira in the last six months is not because there was any sudden calamity in the Nigerian economy.

“It was primarily because of very reckless speculations, that people were just speculating in the dollar, they had nothing to export, nothing to import, they were just buying the dollar for speculative reasons.

“And once the Central Bank started to impose discipline in the foreign currency market, we saw the value of the Naira rising very quickly by stopping speculation,” he said.

According to him, the strategies of the Central Bank, now, are designed to achieve a sustained discipline in the foreign currency market.

Idahosa highlighted the need to continue reducing the number of Bureau de Change operators, stressing that many operated without contributing to international trade.

He applauded the Central Bank’s move to enforce documentation and identification of buyers and sellers at BDCs, aiming to deter reckless speculation and curb illicit financial flows.

On the fiscal side, Idahosa urged President Bola Tinubu to prioritise a nationwide export drive, citing it as the key to bolstering the Naira and providing essential foreign exchange.

He emphasised the importance of fostering a culture of export among Nigerians across all scales of enterprise to reduce reliance on imports and strengthen the country’s economic resilience.

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Foreign reserves decline to $32.29bn

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The foreign reserve has depleted to $32.29 billion, which is a six-year low in the Central Bank’s course to save the naira.

This is the lowest level the reserves have been since September 25, 2017, when it was $32.28 billion.

The country’s foreign reserves declined by 6.2 percent, losing $2.6 billion since March 18, when the naira started its rebound from record-low levels against the dollar to $32.29 billion as of Monday, based on the latest available data from the CBN.

At the beginning of the month, the reserve was at $33.57 billion, then further dipped to $32.6 billion by April 12.

This comes as the CBN has attempted to save the naira through various interventions such as raising interest rates to 24.75 percent and managing foreign exchange trades.

It stepped up its intervention in the FX market with sales at both the official market and to BDC operators who sell dollars on the streets.

The apex bank, which sells $10,000 to each BDC every week, mandated them to only sell at a spread of 1.5 percent, which comes to N1,117 per US dollar.

The rate sold by the BDCs has set a defacto floor for the naira in the black market since the apex bank resumed sales to them in February.

Also, last month the CBN said it had cleared a backlog of $7 billion since the beginning of the year. That was built over the years as the central bank pegged its currency against the dollar, leading to a scarcity of foreign currency that deterred foreign portfolio investment. However, it’s unclear how much dollar debt the CBN retains on its books.

Akpan Ekpo, a professor of economics and public policy, said the CBN’s managed float system in which it is trying to ensure supply and curtail demand is not sustainable in the long term.

He said the CBN needs to be careful with how it depletes the foreign reserves as its main source is oil revenue.

“We need to manufacture non-oil goods and services, export them, and get foreign exchange and not depend on oil income,” he said.

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CBN expresses commitment to harnessing digital technologies

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The Central Bank of Nigeria says it is committed to harnessing the power of digital technologies to enhance financial inclusion.

CBN Governor, Mr Yemi Cardoso said this on Tuesday in Abuja, during a strategic institutions tour by participants of Senior Executive Course 46 of the National Institute of Policy and Strategic Studies (NIPSS).

Cardoso, who was represented by Dr Bala Bello, Deputy Governor, Corporate Services, said that digital technologies would also boost productivity and create an enabling environment for innovation and entrepreneurship to thrive.

According to him, the apex bank has already deployed robust digital technologies in driving most of its processes towards achieving optimal performance.

He said that NIPSS, as a foremost national policy think-tank, had made invaluable contributions to the socio-political and macroeconomic development of Nigeria.

“We are, therefore, not surprised at the apt and relevant choice of your research theme.

“The CBN and NIPSS have had a long-standing and robust working relationship since the establishment of the institute. This has culminated into positive mutual benefits for the two institutions.

“The CBN, on the one hand, has provided infrastructural support to the institute through construction of an auditorium and a hostel, in addition to the provision of technical support.

“On the other hand, NIPSS has supported the technical capacity of the CBN through the training of some personnel both at senior executive course level and intermediate course cadre,” he said.

The Director-General of NIPSS, Prof. Ayo Omotayo, said that the study visiting would be representing the institute in getting information from operators of the apex bank on the relevance of digital technology to developing jobs for Nigerian youths.

According to Omotayo, a lot of progress has been made globally in using digital systems to run the economy.

“The more of our activities that we can put in digital format, the more we get the opportunity of providing employment access to a whole lot of the 120 million active Nigerians.

“We at NIPSS always knock at the frontiers of knowledge, checking what is going to happen in the immediate future.

“We are working towards a system where we believe that almost every service can be delivered digitally,” he said.

The Acting Director, Monetary Policy Department of the CBN, Dr Lafi Bala Keffi, commended the NIPSS study group for its interest in the apex bank.

She urged the participants to explore the time-tested culture of NIPSS, which is to diagnose national, profer practical solutions and recommend ways of making such solutions realisable.

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