Center for the Promotion of Private Enterprise (CPPE) has stated that the forex crises and surge in demand during the December festivities led to the uptick in inflation.
This was disclosed by the CEO of CPPE, Dr Muda Yusuf, in a document titled “CPPE COMMENTS ON DECEMBER INFLATION REPORT.” Nigeria’s inflation rate in December 2021 rose to 15.63% from 15.4% recorded in November 2021, after 8 months of consecutive decline.
Nigeria still experiences forex problems as the exchange rate between the naira and the US dollar at the official Investors and Exporters (I&E) window closed at N416.25/$1, while the black market trade around N570/1$.
What the CPPE is saying
Dr Muda mentioned that the surge in inflation was due to the uptick in demand during the celebration season. He said, “The surge in demand during the December festivities must have played a role in the marginal spike and reversal of the deceleration trend in headline inflation.”
He added, “The Core inflation, which relates to non-agricultural products, maintained an upward trend. It increased from 13.85% in November to 13.87% in December. This was largely a reflection of the impact of currency depreciation and the liquidity challenges in the forex market.”
LCCI boss highlighted some implications from Nigeria’s high inflation which includes;
- Escalation of production and operating costs for businesses leading to erosion of profit margins,
- drop in sales,
- decline in turnover
- weak manufacturing capacity utilization
- High food prices which impact adversely on citizens welfare and aggravate poverty.
He also stated that a weak purchasing power poses a significant risk to business sustainability. Also, there is price volatility which undermines investors’ confidence.