Weak purchasing power responsible for slowing inflation rate, says Chukwu

FELIX OLOYEDE
The continuous decelerating inflation rate in the country was largely due to weak purchasing power amongst Nigerians, said Johnson Chukwu, Managing Director, Cowry Asset Management Ltd.
Speaking on the theme: “Economy: H1 2018 review and prospect for year end” at the second edition of the Bloomberg Media Initiative Africa (BMIA) Cohort 4 quarterly roundtable held on Wednesday in Lagos, he explained that the disposable of Nigerians has dipped significantly due to devaluation of the naira and the country’s slow economy growth.
Chukwu noted that as a result of low consumer spending amongst Nigerians, manufacturers were compelled to cut the prices of their goods.
“Declining inflation in Nigeria could be as a result of low consumer spending occasioned by weak disposable income. An average salary earner in Nigeria has suffered a loss of 43.46 per cent in the purchasing power of his/her income in the past three years,” he said.
Nigerian inflation rate has slowed down for 16 consecutive months as the National Bureau of Statistics (NBS) is set to release inflation rate for June on Friday.
He added that if there is no salary increase, standard of living in the country will continue to deteriorate.
The Cowry Asset Management boss reasoned that though Nigeria’s economy was not contracting, it was, however, growing at a pace below its population growth rate, which poses a huge challenge.
He mentioned that the poor performance of the Nigerian equities market was a reflection of the state of the economy.
While making projections for the second half of 2018, Chukwu said the stock market would likely remain bearish for the rest of the year due to capital flight, which would mount more pressure on the country’s foreign exchange market and cause the spread between the official window and the black market widen.
Chukwu opined that inflation rate, which has been slowing down may reverse in the second half of 2018 as a result of increased liquidity in the system from political spending.
According to him, economic growth will be stalled in the second half of the year, though the government would make frantic efforts to put a stop to herdsmen attacks across the country.
“The fact that countries are improving the education, we are not doing so, that is the tragedy of life,” Chukwu asserted.
If Nigeria is able to get the right environment, the country’s economy be growing naturally around 7-8 per cent, he claimed.
“We have not evolved an appropriate framework that would ensure sustainable economic growth,” he added.
If we get leadership right, Nigeria will be a play ground for anyone who wants to invest in Africa, he maintained.
Chukwu argued that federal government’s plan to release N5,000 to poor Nigerians from the recovered $322 million Abacha loot, was not in the best interest of the country, explaining that handout does not end hunger.
The government would be confronted with the challenge of meeting its revenue projection because of renewed pipeline attacks in the Niger-Delta, which has made oil output drop to 1.7mllion barrel per day, he further noted.

Johnson Chukwu, CEO, Cowry Assets Management