The Lagos Chamber of Commerce and Industry (LCCI) has disclosed that the persistent inflation, reaching a 28-year record high of 34.60 per cent in November, has continued to fuel a tense business environment, elevating prices in various business operations.
The LCCI stated that it was 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”. The Director-General of LCCI, Dr. Chinyere Almona, revealed in her reaction to the latest release of Headline Inflation Rate by the National Bureau of Statistics (NBS), that “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 farreaching 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.”
She, however, added that “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,” she said.
According to her, 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 $1.25 billion during the third quarter of 2024 compared with $2.60 billion 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 $103.82 million, or 8.29 per cent,” she asserted. Speaking on the security challenges, the LCCI DG pointed out that “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-level policing.”
In addition, Almona stressed: “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.”
