The Lagos Chamber of Commerce and Industry (LCCI) has called on the federal government to reduce taxes on basic food items as a means to alleviate the impact of rising inflation on the most vulnerable Nigerians.
This recommendation comes in response to the recent release of Consumer Price Index (CPI) data by the National Bureau of Statistics (NBS), which revealed a continuous increase in the headline inflation rate, reaching 22.41 percent in May.
Additionally, the food inflation rate rose to 24.82 percent, further exacerbating the challenges faced by the populace.
The LCCI emphasizes the need for the government to implement fiscal measures that would address the concerns surrounding inflationary pressures. One of the proposed measures is the reduction or elimination of taxes on essential food items.
By doing so, the government can protect the most vulnerable members of society and stimulate demand-side growth, thereby mitigating the adverse effects of inflation.
The LCCI’s recommendation to pause interest rate hikes is another crucial aspect of their proposal. By halting increases in interest rates, economic agents can be relieved of the financial burdens they currently face.
This move would provide much-needed respite to businesses and individuals, allowing them to better navigate the challenges brought about by rising inflation.
The chamber also expresses concerns about potential future inflationary pressures, particularly in relation to the removal of fuel subsidies and the floating of the Naira exchange rate. These policy changes may have inflationary implications, further impacting businesses and households.
To mitigate the potential negative effects, the LCCI urges the government to expedite the provision of anticipated palliative measures that could alleviate the rising trend in prices faced by economic agents.
As a result of the anticipated inflationary pressures, businesses are likely to adopt cost reduction strategies such as downsizing and sourcing inputs locally. These measures aim to lower operating expenses and adapt to the challenging economic environment. However, such strategies may lead to job losses and hinder economic growth in the short term.
Household real income is expected to continue declining, particularly in the near term, due to the persistence of inflation. This would further strain the financial well-being of individuals and families, making it imperative for the government to take swift action to address these concerns.
LCCI’s call for the government to cut taxes on basic food items is a reasonable recommendation in the face of rising inflation in Nigeria. Such a measure would provide relief to vulnerable segments of society and stimulate demand-side growth.
Alongside this, the pause in interest rate hikes and timely provision of palliatives are essential to mitigate the impact of inflation on economic agents. The government must consider these recommendations seriously to ensure the well-being of its citizens and foster economic stability.