A major macroeconomic concern to stakeholders in the Nigerian economy is the surging inflation. Headline inflation accelerated to 21.09% in as against 20.77 in September. However, on a month-on-month assessment, there was a decline of 0.11% in the headline inflation. It declined from 1.36% in September to 1.24% in October.
Food inflation maintained its upward trajectory, accelerating to 23.72 with a month on month decline of 0.21%. Core inflation similarly spiraled to 17.76% in October.
Evidently, we are yet to see an abatement to the key factors fueling inflation. Some of these factors are global, others are domestic. They are a combination of structural and policy issues.
These factors include the depreciating exchange rate, rising
transportation costs, logistics challenges, forex market illiquidity, hike in diesel cost, climate change, insecurity in many farming communities and structural bottlenecks to production. These are largely supply side and policy concerns. Monetary policy tightening in most economies around the world, especially the leading economies, is also driving imported inflation and the depreciation in the exchange rate.
The accelerated growth in fiscal deficit financing by the CBN is heightening liquidity in the economy with consequences for soaring inflation. Mounting inflationary pressures have the following consequences for the economy:
Tackling inflation requires urgent government intervention to address the challenges bedeviling the supply side of the economy, addressing production and productivity constraints, fixing the dysfunctional forex policy, and institution of fiscal reforms to curb escalating deficit spending.
To give producers and citizens some relief, the government could tweak the tariff policies by granting concessionary import duty on intermediate products for industrialists, especially those in the food processing segments of the agriculture value chain.
