The Nigerian Centre for Promotion of Private Enterprise, CPPE, stated that the Central Bank of Nigeria’s (CBN) financing of the fiscal deficit has resulted in rising inflation.
This was revealed in a statement given to Nairametrics by its CEO, Dr Muda Yusuf.
Dr. Yusuf revealed that Nigeria is suffering from a “Inflation Tax” as a result of the central bank’s contribution to increasing money supply.
The CPPE comments comes after the the National Bureau of Statistics (NBS) announced yesterday that Nigeria’s inflation rate jumped by 20.77% year-on-year in September 2022. On a month-on-month basis, the index rose by 1.36% compared to the 1.77% increase recorded in the previous month.
Dr Muda said, “The CBN financing of fiscal deficit has been elevated to disturbing levels with huge implications for money supply growth and consequent effect on inflation. It is inflation tax.”
He added that “elevated inflationary pressures weaken purchasing power of citizens as real incomes are eroded, increases poverty incidence, aggravates pressure on production costs, negatively impacts profitability, erodes shareholders value and undermines investors confidence. “
Dr Muda started that Nigeria manufacturer are also feeling the pains of inflation. He said, “In most cases, increases in production costs cannot be transferred to consumers. The implication is that manufacturers are also taking a hit. This is more pronounced where the demand for the product is elastic.”
He added that tackling inflation requires urgent government intervention to address the challenges bedevelling the supply side of the economy and the moderation of fiscal deficit monetization.
He said, “To give producers some succour, the government could tweak the tariff policies by granting concessionary import duty on intermediate products for industrialists. It imperative at this point to review the import policy on some food items to provide some succour to citizens in the face of excruciating poverty. “
“The CBN also needs to adopt a flexible exchange rate policy to address the problem of acute forex scarcity in the economy,”Yusuf added.