The Lagos Chamber of Commerce and Industry (LCCI) has warned that businesses may be forced to implement various cost reduction strategies, including downsizing and local sourcing of input factors as they bid to lower operating expenses if the consistent rise in inflationary pressure is not checked.
The LCCI made this known in a press statement signed by its Director General, Dr Chinyere Almona, FCA. According to the statement, “Given the recent Consumer Price Index (CPI) data released by the National Bureau of Statistics (NBS), inflation rate shot up to 22.41 per cent in May – the fifth consecutive month, from 22.22 recorded in April, an increase of 0.19 percentage points.
“Food inflation rate increased by 0.21 percentage points to 24.82 per cent, from 24.61 per cent the previous month. Core inflation reduced slightly by 0.08 percentage points to 20.06 per cent in May from 20.14 per cent in April and 14.90 per cent in May 2022. Furthermore, the data revealed that food and non-alcoholic beverages, housing, water, electricity, gas and other fuel, clothing & footwear and transport were the major contributors to the acceleration in headline inflation.”
The LCCI expressed concern that there may be a consistent increase in inflationary pressures in the near term. There are also fears that fuel subsidy removal and the floating of the Naira exchange rate will come with its inflationary impact. As a result, businesses will want to lower operating expenses while household real income will continue to experience a decline, especially in the near term.
The LCCI recommended a pause in interest rate hikes to relieve the pressures on economic agents. It also urged the government to implement fiscal measures such as reducing/ removing the tax on basic food items to protect the most vulnerable as well as spur demand-side growth. The LCCI implored the government to hasten the provision of the anticipated palliatives to lessen the impact of the rising trend in prices on economic agents.
The LCCI also called on the government to take steps to improve the supply of foreign exchange, which will help to reduce the cost of imported inputs and raw materials. It also urged the government to work with the private sector to develop a comprehensive plan to address the rising cost of food and other essential commodities.
The LCCI said that it is committed to working with the government and other stakeholders to find sustainable solutions to the challenges posed by rising inflation.
