The Lagos Chamber of Commerce and Industry (LCCI) has warned that 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, dropped this warning against the backdrop continuous hike in food prices, costs of production and low investment which he sees as direct consequences of government’s failure to address inflation factors.
It will be recalled that 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.
“It is not a significant drop. The fact that we have a drop in inflation rate does not mean that prices of goods will come down. 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.
According to the LCCI DG, 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, he asserted. “If there is anything that impacts adversely on the poor, it is inflation and particularly high prices of food and services,” he said.
He further pointed out that to see a dramatic impact on citizen’s welfare and price of foods, inflation rate has to reduce drastically below its present level adding that 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”.
“Without prejudice to looking inward or being self reliant as a nation, we need to review some of the import duties especially in sectors where we do not have strong local capacity.
“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.
While calling for a tax review for manufacturers to reduce cost of production and encourage their competitiveness, he pointed out that 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.