BY ONOME AMUGE
The Lagos Chamber of Commerce and Industry (LCCI) has projected that the ongoing Russia-Ukraine war will trigger shocks in the manufacturing and agricultural sectors of the Nigerian economy in the second quarter (Q2) of 2022, amid the record high prices of commodities across the globe.
Michael Olawale-Cole, president of the LCCI, stated this at the recent LCCI quarterly media briefing on the state of the Nigerian economy held in Lagos.
Olawale-Cole observed that the persisting war fuelled a positive oil price shock with spillover effects on operating costs, raw materials, and inflation in countries not directly engaged in the war, adding that Nigeria was not exempted as prices of goods and services are moving upwards at an alarming acceleration with the potential implication of supply distortions in production of goods and services.
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The LCCI president also predicted that headline inflation, which rose to 15.7 percent in February, will remain elevated should the conditions persist in the second quarter of the year.
This would be as a result of the impact of the raw materials supply chain disruptions production volumes, foreign exchange illiquidity, domestic inflationary pressure, weakening purchasing power, poor public infrastructure, port-related challenges, and security crisis in major food producing states, which may continue to present headwinds on consumer prices, as well as the performance of the manufacturing and agricultural sectors, Olawale-Cole explained.
He further projected that the rising cost of production may not abate soon, with the war in Ukraine aggravating disruptions to supply chains of basic soft commodities like wheat, barley, soybeans, sunflower, and corn, used as raw materials in food production companies.
On how to mitigate the situation, he advised the government to adopt the most sustainable solution of boosting local production of food staples such as wheat and rice, to levels that meet local demands.
He also suggested that a broad-based harmonisation of fiscal and monetary policies toward addressing the identified structural constraints will significantly help moderate inflationary pressure in the short term.