NESG Urges FG To Cut Production Cost To Tackle Inflation

The Nigerian Economic Summit Group (NESG) has called on the Federal Government to focus on reducing production costs and increasing productivity.

It said further interest rate cuts might not be enough to bring down prices of commodities in Nigeria

Speaking on Channels Television’s Business Morning on Thursday, Acting Head of Research and Development at the NESG, Faith Iyoha, said monetary policy alone could not address the structural challenges driving inflation, despite the recent easing in price increases.

According to her, the government must introduce reforms that will make it cheaper for businesses to produce goods and services.

“Monetary policy can help to moderate the demand side of pressure. However, it is not sufficient. It cannot drive productivity,” she said.

“So we need to be able to drive production of goods that the everyday Nigerian purchases. We must move to reduce the cost of production, and it’s important to state that we need to start driving supply-side reforms that are essential to bring down inflation.

“Monetary policy, they’ve done the best they could, and they’ve used the windows that they have. But at this point, I think it is time for supply-side reforms to kick in. And the supply-side reforms are reforms that are directly articulated to drive production costs down and increase productivity,” she added.

Her comments come on the back of the Central Bank of Nigeria (CBN) Monetary Policy Committee’s decision to reduce the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent at its meeting in September.

The MPR is the benchmark interest rate that influences borrowing costs and other interest rates in the economy.

While lower interest rates can ease borrowing costs and support economic activity, Iyoha argued that they would not address the high cost of producing goods in Nigeria.

She said lasting progress against inflation would depend on the country’s ability to increase the supply of goods and produce them at lower costs.

“Durable anti-inflation policy in the economy can only be driven when we can produce more at a cheaper cost,” she said.

She cited insecurity and inadequate infrastructure as some of the challenges increasing production costs and discouraging investment.

She explained that insecurity affects the movement of goods and raises business costs, while concerns about the safety of lives, property and transport routes could deter foreign investors.

The NESG official also called for policies that would attract more foreign direct investment to support long-term productive activities.

She said Nigeria needed to move beyond relying on monetary policy to control demand pressures and pay greater attention to reforms that would improve domestic production.

Iyoha stressed that the ultimate goal should be to ensure that improvements in inflation figures translate into relief for households, as Nigerians continue to contend with high prices, adding that it is not just about statistics, “but statistics that are relevant to the ordinary man.”