Samantha Johnson
Mon, Jul 24, 2023 10:05 AMAnalysts Urge Holistic Policy Measures to Address Rising Inflation in Nigeria
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In Nigeria, inflation continues to rise, posing a significant challenge to the country's economy. Analysts are calling for the implementation of comprehensive policy measures to address the issue and keep the economy afloat in the short term. They emphasize the need for both fiscal and monetary authorities to adopt a more flexible and predictable foreign exchange management model.
The persistently high commodity prices in Nigeria are being held back by structural problems such as electricity shortages, transport and logistics inefficiencies, labor and product market rigidities. These challenges, coupled with ongoing geopolitical tensions in Europe and the Central Bank's insistence on lowering inflation, are expected to sustain the pressure on food prices in the country.
Analysts also advise the Nigerian government to expedite the implementation of policies that will help diversify its export potentials. They suggest tapping into the country's vast stock of natural and agro resources. They argue that the elevated price levels in Nigeria are mainly driven by supply-side shocks rather than demand-side factors.
While the recent inflation print may have positively surprised the market, underlying price pressures are still intact. Prices remain significantly above the comfortable levels set by the Bank of England (BoE), and high wage growth poses further risks to near-term inflation.
Furthermore, analysts believe that Nigeria's economy may suffer disproportionately across other key metrics if the current inflationary pressures persist. These potential challenges include worsening credit availability, diminished capital inflows, tighter monetary policy, and a decline in the stock market.
To address these issues, analysts implore the Central Bank of Nigeria (CBN) to adopt a more flexible and predictable foreign exchange management model. Restoring the confidence of foreign investors is crucial for the country's economy. Additionally, policy coordination, diversification of exports, and improvements in the ease of doing business are recommended to mitigate inflationary pressures.
The rise in inflation has been impacting households and businesses in Nigeria. Prices of goods consumed by most households have jumped significantly, causing a collapse in real incomes and worsening the poverty situation. Small businesses have also been severely impacted, as they have limited capacity to absorb such economic shocks.
However, analysts warn that the technical computation of inflation figures does not reflect the reality on the ground. They suggest that prices of goods and services have actually increased by 30-100% over the past year for most households and businesses.
Given the challenges posed by inflation, the Nigerian government faces the urgent task of adopting effective policy measures to alleviate the pressure on citizens' welfare and stimulate economic growth. Coordinated efforts between fiscal and monetary authorities, along with comprehensive reforms and strategic planning, can help address the inflationary challenges and pave the way for a more stable and prosperous economy in Nigeria.
Source of content: OOO News 2023-07-24 News
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