How Nigeria can tame rising inflation?

The latest report from the National Bureau of Statistics reveals that Nigeria's headline inflation surged to 25.8% in August, up from 24.08% in July. This significant increase has been primarily driven by food inflation, which remains a major concern for the country's economy. In addition, recent developments in the oil market and currency depreciation have further exacerbated the situation, with oil marketers in Nigeria hinting at a possible hike in petrol prices. To delve deeper into these economic challenges, Muda Yusuf, Director at the Centre for the Promotion of Private Enterprises, shared insights in an interview with CNBC Africa. Yusuf highlighted the key factors influencing the inflationary pressures in Nigeria, touching upon the impact of foreign exchange rates, rising oil prices, and insecurity affecting food supply. These factors have created a perfect storm, leading to a surge in prices across various sectors. Businesses in Nigeria are grappling with the effects of soaring inflation, facing increased production costs and squeezed profit margins. Yusuf noted that businesses are finding it challenging to pass on these cost increases to consumers, resulting in a burden on their operations. The impact on households is equally severe, as rising inflation erodes purchasing power, leading to a decline in sales and worsening living conditions for citizens. The situation calls for urgent measures to address the root causes of inflation and provide relief to both businesses and households. Looking ahead to potential policy responses, particularly in the upcoming Monetary Policy Committee (MPC) meetings, Yusuf expressed skepticism about the effectiveness of further monetary tightening. With interest rates already high, tightening monetary policy further may not be the solution to combat inflation. He emphasized that the key drivers of inflation are more deeply rooted in fiscal and structural issues rather than monetary factors. Instead, Yusuf stressed the importance of leveraging fiscal policies to address key economic challenges, such as energy and food prices. By reducing taxes, removing levies, and adjusting import duties on critical commodities, the government can help alleviate inflationary pressures and support businesses and consumers. However, the fiscal landscape poses its own challenges, particularly with Nigeria's growing debt burden. Recent data from the Debt Management Office indicates significant spending on debt servicing, amounting to 2.34 trillion naira in the first half of the year alone. Yusuf acknowledged the pressing issue of escalating debt servicing costs, driven by the country's ballooning debt profile, which now stands at 87 trillion naira. Addressing the debt dilemma will require strategic planning and potentially restructuring to ease the burden on the economy. In conclusion, Nigeria faces a critical period of economic uncertainty, marked by soaring inflation, challenging business conditions, and mounting debt obligations. As stakeholders navigate these complex issues, a coordinated effort between monetary and fiscal authorities is essential to steer the economy towards stability and sustainable growth. The road ahead demands strategic interventions and prudent decision-making to mitigate the impact of inflation on businesses and citizens, ultimately fostering a more resilient economic environment for Nigeria.