LCCI expresses concern over rising inflation rate
Lagos Chamber of Commerce & Industry LCCI
The persistent rise in the inflation rate, reaching a 28-year record high of 34.60 in November, continues to fuel a tense business environment as elevated prices constrain various business operations.
The Director-General, Lagos Chamber of Commerce & Industry, Dr. Chinyere Almona, said in a statement titled, ‘LCCI statement on the November inflation rate’ on Monday.
The Lagos Chamber of Commerce and Industry (LCCI) is particularly concerned because, with the persistent and unabated rise in inflation, businesses should prepare for more stress from the burden of higher interest rates as we enter the new year.
With the raging inflation rate, the unsuccessful attempt of the Central Bank to reduce the currency in circulation, and approaching a high-spending festive period, we are set to contend with even higher interest rates as the expected outcome from the next decisions by the CBN Monetary Policy Committee (MPC).
The high inflation rate has far-reaching implications. One of the primary effects is reduced consumer spending. High food and core inflation erode disposable income, reducing demand for non-essential goods and services.
Businesses also face increased business costs, as rising transportation, rent, and energy costs elevate production expenses, shrinking profit margins. Moreover, the uncertain macroeconomic environment weakens the investment climate, deterring both local and foreign investments. Persistent high inflation further threatens economic growth by diminishing the competitiveness of domestic industries and stifling expansion.
While we are all confronted with a weak impact of interest rates on curbing inflation, we see a better performance of the reform measures implemented to boost production.
Hopefully, we may see more of the impact of these measures on fundamental indicators like inflation, interest rates, and exchange rates. A coordinated effort is required to drive oil production to earn more FOREX, which is needed to defend Naira in the short term.
The new investments recently entering the oil fields can be well supported with a sound regulatory environment to sustain and attract more. A disappointing negative record of our capital importation at $1.25bn during the third quarter of 2024 compared with $2.60bn recorded in the preceding second quarter of the year points to an unattractive environment for investors. Foreign Direct Investment, the most critical investment that shows long-term investor confidence, accounted for only $103.82m, or 8.29 percent.
The renewed fight against terrorism, kidnapping, and all other vices that make our farms unsafe must be sustained with more funding, the use of intelligence and surveillance technology, and the constitutional amendment to enable multi-levelpolicing.
Soaring food prices, rising energy costs, and widespread price pressures across various sectors, including housing, transportation, and personal services, primarily drive the persistent increase in inflation. These trends exacerbate the already strained economic conditions, undermining the purchasing power of consumers and the profitability of businesses.
We believe the ongoing reforms have the potential to pull through critical deliverables for the economy to return to a growth path and achieve positive levels of the critical economic indicators if sustained.
