The Chief Executive Officer, Financial Derivatives Company (FDC) Limited , Bismarck Rewane has projected that the nation’s economy has 25 per cent probability of slipping into stagflation in 2020.
Stagflation is an economic situation in which prices keep rising but economic activity does not increase.
Rewane who made this statement in Lagos at LBS breakfast session said that the economy is experiencing slowing growth, rising in prices of goods accompanied by high unemployment and failing investment.
Giving more explanation on how stagflation could happen, he said there is pressure on price level due to federal and State government minimum wage consequential costs of N600 billion, arrears of minimum wage from April to November N700 billion and inflation impact of 1.5 per cent.
He said that terms of trade deteriorating now at 27.5 per cent while high dependence on ‘hot money’ was 73 per cent of volatile capital importation.
Rewane who spoke on “The spectre of stagflation” said closure of nation’s border in addition to food import restrictions hiking food inflation.
Mathematically, he explained that food inflation plus imported inflation and wage inflation would be equal to higher inflation.
Meanwhile, the recent market surveyed showed that closure of the nation’s boarder with the neighbouring countries has impacted negatively on the prices of food items especially rice and frozen foods.
The survey showed that the prices of frozen food, especially, carton of chicken lap and both local and foreign rice have gone up in the market.
Specifically, a bag of local rice selling at the rate N17,000 as at the time federal government shut the border is now N21,000 while foreign rice which was N21,000 has become very scarce and more expensive rising between N25 , 000 and N27,000
The survey also revealed that one carton of frozen chicken lap which sold at N9500 before the closure of nation boarder has skyrocked to N15,000.
Food stuff dealers were of the view that the way things are going the prices of local rice and frozen food may worsen before the end of this month
It could be recalled that the federal government had in August closed the nation’s boarders with neighbouring countries as part of measures to check mate cases of snuggling in the country.