Inflation: LCCI urges CBN to address FX scarcity, fuel cost

The Lagos Chamber of Commerce and Industry (LCCI) says the Central Bank of Nigeria’s (CBN) monetary policy rate hike alone will not yield the desired result of lowering inflation.

Chinyere Almona, LCCI director-general, said this on Wednesday in reaction to the decisions of the monetary policy committee (MPC) of CBN, in Lagos.

TheCable had reported that the MPC raised the monetary policy rate (MPR), which measures interest rate, from 13 percent to 14 percent in response to the surging inflation rate currently at 18.60 percent.

The MPR is the baseline interest rate in an economy, every other interest rate used within an economy is built on it.

According to Almona, there is a need for a corresponding boost to supply-side factors of inflation to accompany the monetary policy instruments by the apex bank to tackle inflation.

She said supply-side factors like foreign exchange scarcity, insecurity, rising costs of fuels and weak infrastructural support for production must be addressed.

However, she admitted that CBN’s rate hike was seen to be a necessary option considering that many other economies were raising rates for the same reason of taming inflation.

According to her, a comparatively low-interest rate could make the country’s portfolio assets less attractive to asset buyers and offshore investors.

Almona said this could make the economy suffer from massive capital flight with a negative effect on the exchange rate.

“We note the gloomy outlook of the global economy which has a direct link to our domestic economy with pass-through effects of imports,” she said

“The persistent war in Ukraine and other disruptive factors may present as risks into the end of the year.

“Tightening of rates may have been a good decision by the MPC as that was necessary to tame the rising inflation rates in the past months.”

The LCCI boss urged the CBN to maintain its targeted intervention schemes for agriculture, manufacturing/industries, energy, infrastructure, healthcare, exports, and Micro, Small, Medium Enterprises (MSMEs).

“Beyond the goal of stabilising prices, there are other key goals besides this; full employment, economic growth, and balance of payment equilibrium are equally important,” she added.

“While it is expedient to curb inflation rates, we equally risk a contracted economy that may go toward a recession.

“This calls for the need to embark on targeted financing for critical sectors of the economy to help boost the supply-side.”