Rising Inflation: FG Called to Block Leakages and Reduce the Cost of Governance

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Tuesday, May 18, 2021 / 3:45 PM/ Ottoabasi Abasiekong for WebTV /Header Image Credit: WebTV


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Despite the rising tide of inflation in Nigeria, the Federal Government has been called to block leakages in its public finance, take the bold step of removing petroleum subsidy, and reduce the cost of governance.

 

Mr. Adesola Borokinni, Senior Economist Proshare, made this call at the second edition of the #theAnalystSpeaks which discussed "What Nigerians Need to know About Inflation and Its Effects On Their Income".

 

According to Borokinni, the aforementioned steps would improve revenue to enable the government to address hard and soft infrastructure problems and increase investments in the productive sectors of the economy, he said this could notably reduce the burden of inflation on the incomes of citizens.

 

He acknowledged the fact that the government was in a "Cache-22" situation with lean revenue and growing expenditure, which means it needs to take hard decisions on stabilizing the economy.

 

The economist noted that the current headline inflation rate for April 2021 was 18.12% and food inflation was 22.75%. He was of the view that the inflation rate over the last twenty months has had a devastating impact on low and middle-income earners in Nigeria.

 

He equally observed that increasing insecurity in the food belt of the country especially the North-Central and North-Eastern parts has resulted in a spike in country-wide food inflation.

 

Borokinni highlighted data by the National Bureau of Statistics (NBS) showing that the country's trade deficit was about N7.3trn in 2020, with imported goods worth over N3trn and exported goods of about  N120bn.

 

The analyst noted that fiscal policymakers must explore how the country can pivot away from import dependence to non-oil export resilience.

 

Other areas he identified as key issues include;

  • Providing enabling policies that will attract foreign and domestic direct investments.
  • Allowing a market-based pricing template for electricity in the country.
  • Ensuring accountability in the disbursement of loans from multilateral financial institutions
  • Proper communication of economic policies and strategies to citizens. 

Concerning the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) meeting scheduled for between the 24th and 25th, 2021 he thought that the MPC would maintain the monetary policy rate (MPR) at 11.5% and all other parameters because of the slight decline in inflation.

 

He added that the CBN would take a pro-growth approach, which would show up as an increase in development finance activities to support vital sectors of the economy.

 

On the outlook for inflation in 2021, he said insecurity remains a major concern in the country even as food and headline inflation will rise but at a reduced level.

 

He called on the government to give top priority to driving the reforms at the seaports and terminals in the country, while the monetary policy authorities should unify the foreign exchange rate for clarity to investors.


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