The Centre for the Promotion of Private Enterprise (CPPE) has said rising energy prices could reverse Nigeria’s recent disinflation gains if higher costs persist.
In a policy brief on Thursday, Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), said monthly energy inflation accelerated from 0.36 percent in August to 5.38 percent, raising concerns about the sustainability of the decline in inflation.
“The sharp monthly energy-price increase also raises the risk that the recent disinflationary gains could be reversed if higher energy costs persist,” Yusuf said.
Yusuf said headline inflation fell from 15.39 percent in August to 14.63 peercent in September, a decline of 76 basis points.
Monthly headline inflation also dropped from 0.71 percent to 0.06 percent.
He said annual core inflation moderated from 13.29 percent to 12.95 percent, while monthly core inflation rose from -0.06 percent in August to 1.11 percent in September.
The CPPE chief said the Middle East geopolitical crisis has heightened volatility in global petroleum markets, exposing Nigeria to external energy-price shocks.
He said higher petrol, diesel and gas prices raise transportation, distribution and production costs, with possible effects on food and core inflation.
Yusuf called for a reliable electricity supply, expanded compressed natural gas (CNG) infrastructure, greater adoption of electric mobility and improved domestic refining efficiency to strengthen Nigeria’s energy resilience.
“The policy priority should therefore be to strengthen domestic energy resilience through reliable electricity supply, expansion of CNG infrastructure, greater adoption of electric mobility and improved domestic refining efficiency,” he said.
Yusuf called for further gradual and prudent monetary easing while safeguarding foreign exchange (FX) stability and inflation expectations.
He recommended measures to improve agricultural productivity, logistics, roads and storage, as well as eliminate multiple levies and checkpoints that raise distribution costs.
The CPPE chief said better coordination among federal, state, and local governments is also necessary.
Yusuf said lower inflation alone would not guarantee improved business conditions if operating costs remain high.
“Investors should distinguish between declining inflation and declining operating costs. The former improves the macroeconomic outlook; the latter is essential for stronger profitability, competitiveness and sustainable investment expansion,” he said.
Yusuf said reducing energy costs and addressing structural constraints in food production and distribution are important to sustaining disinflation and supporting investment.
