New Telegraph

Stagflation: Analysts seek measures to improve productivity

As Nigeria grapples with sluggish economic growth and soaring inflation, analysts at PFI Capital have said that the country is facing stagflation and have, therefore, called for an increase in policies to boost national productivity. The analysts stated this in a report titled, “The Nigerian double whammy of inflation and unemployment: More of structures than event,” obtained by New Telegraph yesterday.

They cited the February 2021 Consumer Price Index (CPI) report released by the National Bureau of Statistics’ (NBS) on Tuesday, which that inflation rose to a four year peak of 17.33 per cent, as well as the report released by the Bureau on Monday, which indicates that the country’s unemployment rate rose to 33.3 per cent in the fourth quarter of 2020 compared to 27.1 per cent in Q2. The analysts stated: “Traditionally, there exists an inverse relationship between unemployment and inflation, i.e. economic growth comes with inflation, which in turn should lead to more jobs and less unemployment.

A weak 0.11 per cent economic growth, employment rate above 30 per cent and inflation rate of 17.33 per cent clearly negate the this theory, as such, the country is termed to be facing a situation called stagflation (a period of simultaneous increase in inflation and dwindling economic growth) “While there is no direct solution for stagflation, policies targeted at improving productivity such as enabling business environment (security and infrastructure) has to be increased to the point where it would lead to higher growth without additional inflation.”

According to the analysts, inflation is likely to maintain its uptrend this month given “the price impact of the recent spike in PMS pump price that was later reverted,” and “ food inflation (that) is still being pressured on the back of continued insecurity inhibiting sufficient food production by farmers across the country.” “Other issues such as logistics constraints, exchange rate instability and high levels of system liquidity are also expected to push prices upward,” the analysts said.

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