FG needs to address soaring cost of living – CPPE

THE Centre for the Promotion of Private Enterprise (CPPE) has called on the Federal government to urgently institute measures to mitigate the soaring cost of living and escalating operating and production costs for businesses.

The CPPE made the call in its half-year economic review and outlook for the second quarter of 2023, issued on Sunday, July 2, by its director/chief executive execute officer (CEO), Muda Yusuf.

Reforms of fuel subsidy removal and exchange rate unification by the President Bola Tinubu administration have plunged Nigerians into untold hardship as transportation fare, food prices and other costs of living have skyrocketed.

Yusuf, an economist, stressed the urgent need for the government to address the social outcomes of the reforms, especially the inflationary pressure induced by fuel subsidy removal.

He said, “Inflationary pressures may intensify in the near term, and the exchange rate may come under pressure in the short term as forex demand backlog exerts pressure on the official forex window.”

He, however, expected the pressure created by the exchange rate unification to ease before the end of the year.

    “This would pave way for an equilibrium exchange rate, which would be more tolerable and sustainable,” he said, urging the Central Bank of Nigeria (CBN) to put in place a sustainable intervention framework to moderate the volatility in the forex market.

    “With a better fiscal space, outlook for lower fiscal deficit, moderation in the growth of public debt, reduction in debt service burden, and an improvement in the macroeconomic stability are very positive.  All of these would impact economic growth prospects in the second half of the year,” Yusuf explained.

    Offering suggestions on interventions the Tinubu administration must “promptly” deploy to mitigate the consequences of its reforms, the CPPE chief said, “The interventions should be a mix of direct interventions: tax incentives for low-income employees and small businesses, reduction in import duty on some critical intermediate products for key sectors of the economy, and import duty concessions for the transportation, health, power and energy sectors.

    “The improved fiscal space created by the reforms should make these mitigating measures feasible, and they have to be implemented urgently in order to give the current reforms a human face.”

    Meanwhile, the Nigerian economy was negatively impacted in the first half of the year, majorly by the naira redesign policy of the central bank, persistent flaws in foreign exchange policy, political transition processes, weak oil production recovery, and the intractable challenge of insecurity in parts of the country, Yusuf stated.

    As a result, the gross domestic product (GDP) growth remained weak and fragile as it slowed to 2.31 per cent, from 3.5 per cent in the fourth quarter of 2022.

    Key contracted sectors included agriculture by 0.9 per cent; livestock subsector, 30.6 per cent; oil refining, 35.8 per cent; textiles, 3.7 per cent; rail transportation, 49 per cent; and insurance, eight per cent.

    But manufacturing grew by 1.6 per cent; food and beverage, 3.9 per cent; chemical and pharmaceutical, 6.2 per cent; vehicle assembly, 5.4 per cent; road transport, 8.0 per cent; ICT, 11 per cent; financial institutions, 25 per cent; and real estate, 1.7 per cent.

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