A case has been made for why it is imperative to remove tax on basic food items to protect the most vulnerable and stimulate demand-side growth in Nigeria. Given the recent Consumer Price Index (CPI) data, released by the National Bureau of Statistics (NBS), inflation rate shot up to 22.41 per cent in May 2023, which is the fifth consecutive month, from 22.22 recorded in April, an increase of 0.19 percentage points. Food inflation rate increased by 0.21 percentage points to 24.82 percent, from 24.61 per cent the previous month while core inflation reduced slightly by 0.08 percentage points to 20.06 per cent in May from 20.14 per cent in April and 14.90 per cent in May 2022.
As a result of the CPI data, food and non-alcoholic beverages, housing, water, electricity, gas and other fuel, clothing and footwear, and transport were found to be the major contributors to the acceleration in headline inflation. The Lagos Chamber of Commerce and Industry (LCCI) has expressed concerns that there may be a consistent increase in inflationary pressures in the near term. LCCI, in a statement, signed by its Director-General, Dr. Chinyere Almona, noted that there are fears that fuel subsidy removal and the floating of the Naira exchange rate would come with its inflationary impact.
“As a result, we anticipate businesses will implement a variety of cost-reduction strategies, including downsizing and local sourcing of input factors as they bid to lower operating expenses. Also, household real income will continue to experience a decline, especially in the near term”, it added. The group, therefore, recommends a pause in interest rate hikes to relieve pressures on economic agents, and urged the government to implement fiscal measures such as reducing or removing the tax on basic food items to protect the most vulnerable as well as spur demand-side growth. “We implore the government to hasten the provision of the anticipated palliatives in order to lessen the impact of the rising trend in prices on economic agents”, the LCCI stated further.