Support Import Substitution, Reduce Inflation – Economist

To fight growing inflation, economist Prof Bright Eregha has encouraged the federal and state governments to maintain fiscal restraint and encourage import substitution.

He said that because of the government’s economic reforms, the Federal Accounts Allocation Committee’s (FAAC) distribution to different subnational governments had increased dramatically over the previous 12 months.

According to Eregha, the economy’s money supply has increased as a result of these allocation increases.

He claims that if these monies are not directed toward productive industries, it may also increase the existing rate of inflation.

He emphasised that to address the current state of food insecurity, governments must make investments in mechanised agriculture.

“An increased budgetary allocation to mechanise our agriculture is essential to boost food production, irrespective of whether it is harvest season or not,” he stated.

According to Eregha, such investments will help the nation become self-sufficient in its food production and lessen the current inflation brought on by food.

To lower the rate of inflation, Prof Tunde Adeoye, Senior Lecturer in the Economics Department at the University of Lagos, also supported import substitution.

He stated, “The government should adopt macroeconomic policies that will encourage Indigenous companies to commence the production of some imported items locally and be patronized by our people.

“This will strengthen our local capacity and reduce our volume of imports over time, which is exerting too much pressure on our foreign exchange,” he explained.

According to Adeoye, the surge in the inflation rate is more of a structural challenge within the general economy.

He said, “The situation has gone beyond the apex bank’s belief that raising interest rates alone will check the inflation rate.

“Our increase in inflation is more of an economic dislocation which is worsened by the government’s current economic reforms.”

He also emphasised how the government must be more creative in tackling the security challenges that undermine the nation’s food production.

“The government addressing the herders-farmers disputes over the years in food belt states might ameliorate the situation,” Adeoye said.

Nigeria’s inflation rate rose from 33.8 percent in October to 34.6 percent in November, according to the National Bureau of Statistics (NBS).

According to the most recent Consumer Price Index (CPI) report, which was published on December 16, inflation increased by 0.72% in just one month.

In contrast to the 28.2 percent inflation rate recorded in November 2023, the NBS reported a noteworthy year-over-year growth of 6.4%.

Inflation increased by 2.638 percent in November compared to 2.64% in October, a slight decrease of 0.002 percentage points.

Manomsi Mallum/NAN