The Lagos Chamber of Commerce and Industry (LCCI) says unless factors driving inflation are tackled to enhance economic growth and reduce inflation rate significantly, the welfare of citizens will hardly improve.
The LCCI Director-General, Mr Muda Yusuf, said in Lagos that hike in food prices, costs of production and low investment were direct consequences of government’s failure to address inflation factors.
The National Bureau of Statistics (NBS) report, released on May 16, reveals that April inflation rate dropped to 17.24 per cent on year-on-year basis from 17.26 per cent in March.
“Inflation rate is the rate of increases in prices, so it is the rate of increases that is dropping, it is not that prices are dropping.”
“It means that the issue of high prices is still a problem in the economy. It is a problem for businesses and even a bigger problem for the citizens.”
“If there is anything that impacts adversely on the poor, it is inflation and particularly high prices of food and services,” he said.
According to him, to see a dramatic impact on citizen’s welfare and price of foods, inflation rate has to reduce drastically below its present level.
“Over the last one year, prices of foods and pharmaceutical products have doubled, so we still need to do a lot more to bring down prices in the economy,” he said.
The director-general said that trade policies, foreign exchange issues, tax regimes and energy challenges which constituted factors driving inflation should be addressed to experience significant reduction in inflation rate.
“Foreign exchange rate has been a factor and it is beginning to come down a little. Energy cost is a big factor driving inflation but it is not coming down yet.”
“Trade policies have not changed because the import duty on some of the products are still too high.”
“Where we do not have local capacity, import duty should not be high; otherwise, it would be the citizens that would pay dearly for these items,” he said.
Yusuf also said that tax review should be done for manufacturers to reduce cost of production and encourage their competitiveness
“In Ghana, Value Added Tax (VAT) was reviewed from 17 per cent to 3 per cent and some other taxes were also brought down to make it easier for businesses to produce cheaper goods.”
“We can replicate the same in our country so as to reduce the burden of high cost of foods on the masses and also bolster industrial growth,” Yusuf said.
He said that the economy would benefit from reduced tax rates through improved tax coverage and compliance rate from businesses.