THE rise in headline inflation to 24.08 per cent in July 2023 translates to greater pressure on Nigerian households and a deepening of poverty. According to the National Bureau of Statistics, the July inflation rate was the highest recorded leap in 2023, jumping from 22.79 per cent in June. This is hardly surprising as the two main price triggers, the pump prices of petrol skyrocketed, and the naira exchange rate to the United States dollar headed dangerously towards the N1,000 mark. President Bola Tinubu needs an efficient, well-thought-out strategy to tame inflation and its root causes.
NBS explained that year-on-year, the headline inflation rate was 4.44 per cent points higher compared to the rate in July 2022, which was 19.64 per cent. Food inflation rose to 26.98 per cent from 25.25 per cent in June.
Food prices have significantly spiked since Tinubu took over office on May 29, following his impetuous stoppage of petrol subsidy a month ahead of schedule, and shortly afterwards by the flotation of the naira. The attendant 400 per cent increase in the pump price of petrol triggered higher transport fares and steep increases in the cost of goods and services.
Food prices especially have been devastating to the vulnerable segments of the population. Hunger looms, and within weeks of the petrol price increases, the World Bank said 7.1 million more Nigerians were sliding into extreme poverty. More are coming if the pressure continues. In a country where 133 million are reckoned to be multi-dimensionally poor, this is bad news indeed.
A new report by Picodi Research at the weekend shows that on the average, Nigerians spend 59 per cent of their income on food, placing the country at No.1 among 105 countries surveyed on household expenditure. Myanmar and Kenya follow with 56 per cent each, Bangladesh 52.7 per cent, and Laos 50.6 per cent.
Nigeria had the 16th highest inflation rate in the world in 2022 said the World Bank. July’s 24.08 per cent is unfavourable compared to 3.17 per cent in Brazil, 4.7 per cent in South Africa, and India’s 7.44 per cent. Like other countries, Nigeria should take deliberate measures to tame food inflation and boost household incomes. Escalating food and other prices are eroding incomes faster in Nigeria demonstrating that its economy is undoubtedly under stress.
Tinubu and his economic team need to deploy more effective stimulus plans than the current flailing, staccato measures anchored on misdirected “palliatives.” As an import-dependent country, a falling naira means perpetually high consumer prices. Continued reliance on imported refined petroleum products at a time of high crude oil prices and exchange rates is also disastrous.
Remedial policies should have short, medium, and long-term components. Stimulating production – farming, mining, manufacturing, SMEs, and transportation – should be an immediate priority. This requires carefully targeted stimulus interventions. Agriculture and SMEs still provide 24 per cent, and almost 50 per cent respectively of GDP. Together, they account for 90 per cent of employment. These sectors are therefore deserving of tenacious attention.
To jump-start the economy that slowed to 2.51 per cent growth in second quarter 2023 compared to 3.54 per cent Q2 2022, Tinubu should immediately open up the railways, mining, ports, and airports sectors, and immediately privatise state-owned downstream petroleum sector assets. Keeping the four refineries, depots, pipelines, and retail outlets is counter-productive; this locks out investments, jobs, competition, and innovation.
The administration must also do everything possible to end the insecurity ravaging the country to encourage food production. States and local governments should invest in rural infrastructure, agricultural extension services, storage, and preservation of produce.
There should be reinvigorated national emergency programmes on power supply and security involving the central government, states, and LGs. States should quickly plan power infrastructure, including generation, mini, micro, and regional transmission power grids, and distribution networks. They should have robust, realistic economic plans with production, taxation, job creation and investment targets.
Tinubu should critically engage the organised private sector, economists, and small businesses to fashion and roll out well-prepared policies. He should drop his propensity for hasty, unplanned decisions and make boosting production, poverty-reduction, and job-creation the primary focus of all economic planning.
