Business  |  Money  

‘Why inflation, currency volatility may persist

By Chijioke Nelson   |   20 June 2016   |   1:01 am
Yemi-Kale

Yemi-Kale

Unless there is a fusion of monetary and fiscal policies, the push to tame the twin challenge of inflation and exchange rate volatility may remain efforts in futility, experts have said.

Besides, the current flexible exchange policy adopted by the government, notwithstanding its benefits and huge optimism trailing it, will amount to nothing if the current productivity level, diversification campaign and infrastructure remain the same.

The economy, last month, according to National Bureau of Statistics, witnessed four consecutive galloping inflation- 11.4 per cent in February; 12.8 per cent, March; 13.7 per cent, April; and 15.2 per cent, May, which generally are associated to infrastructure challenge for the country.

A faculty member of the Pan-Atlantic University, Dr. Austin Nweze, said government policy should be one that will reduce the interest rate or give a long-term loan to people to buy the machine and produce here, adding that the beginning of our industrialisation rests on our capacity to produce and become original equipment manufacturers.

“Anything that we want to manufacture will have this thing, we can produce the machines do the mode to be able (but that one is not in the short run, we can get that now that is fabrication of equipment?), we can begin how do Hong Kong develop.

“I only tell people that for Nigerian economy to develop we have to improve Aba and Nnewi these are places industrialization will become to make original equipment manufacturers. Hong Kong all this social countries that is what they did, creating imitation they were able to buy this items.

“If a new set of phone comes out they buy it all the engineers dismantle it, redesigned it to suit them, they create a mode the mode will have a place they can manufacture it and produce the same things even better give it another name and compete,” he said.

Already, there is an expectation of continued upward inflation in the coming months as the drivers of inflation are still very imminent such as the lag effect of the recent increase in petrol, food price increase associated with the Ramadan fast and the gradual release of funds for the government’s 2016 expansionary fiscal programme.

“The implication of the new inflation figure is the increase in the effective cost of borrowing for businesses and individuals in the economy. This will manifest in the yields of the federal government bonds, which will trend higher so as to provide adequate inflation cover for investors

“Consumer real income is further pressured which would likely translate to a further decrease in aggregate demand for goods and services in the economy.

This will possibly impact consumer facing companies the most in terms of reduced sales especially for products with cheaper substitutes,” the Associate Research, Ezcellon Capital, Mustapha Suberu, said.

But Nweze maintained that the only way to sustain the new policy is to go back to the production side, which means that the fiscal policy side must have a direction where economy should be- improve the ease of doing business.

The monetary and fiscal side must come together. Nowhere in the world has there been success with only one side of the two. Once we can do 70 per cent or above of what we need, ‘we are home and dry’”, he added.




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