Economists have advised Nigerians to brace for higher inflation in the coming months.
They said that political spending as preparations for the 2023 general elections heightens, worsening exchange rate and other factors would keep inflation high.
As the country prepares for the 2023 general elections, they predicted that political spending worsening exchange rate and other factors would keep inflation high.
The economists – Ken Ife, Gbolade Idakolo, and Uche Uwaleke—also warned that an exchange rate increase would not bring down the inflation rate which currently stands at 19.64 percent, the highest in 17 years.
Ife, a professor of Economics, is the lead Consultant, Industry and Private Sector Development of the ECOWAS Commission while Uwaleke, also a professor of Economics, teaches at the Nasarawa State University, Keffi.
Idakolo, a former banker, is the managing director/CEO, SD&D Capital Management Limited.
Ife, in an interview with The Nation at the weekend, said that “ inflation will get worse before it gets better because it is held hostage by structural factors most of which clearly are beyond monetary policy.”
He listed the structural factors as “insecurity, high cost of diesel, power, gas, solid fuel, foreign exchange rate and imported inflation.”.
According to the expert, other factors that will exacerbate inflation are “high transport cost, galloping prices of farmgate/food sub-basket index-now over 22 percent, political spending, high speculation on the value of the naira, demand pressure on our farm produce from surrounding francophone countries.”
However, Ife was optimistic that “prices will start stabilising with harvest by October/November before December panic Christmas buying.”.
Idakolo who corroborated what Ife said, stated that only lower foreign exchange, improved productivity and lower production cost would bring the current inflation rate down.
“Until the exchange rate is brought significantly lower than it is now and there is an increase in productivity and reduced cost of production, we might not see inflation coming down soon,” he said.
Although the Economist noted that interest rate and exchange rates “are potential tools to control inflation,” he pointed out that they can only “work in a highly productive economy with high consumption rate”.
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