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Food Inflation, Supply Gaps Threaten Inflation Gains, Says CPPE

Olusola Blessing by Olusola Blessing
August 18, 2025
in Business, News
0
Food Inflation, Supply Gaps Threaten Inflation Gains, Says CPPE
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The Centre for the Promotion of Private Enterprise has cautioned that persistent food price increases and month-on-month inflation are exposing unresolved structural weaknesses in the economy, despite the recent slowdown in headline inflation.

According to the organisation, the July 2025 inflation report reflects a mixed outlook that calls for caution and sustained reforms. Headline inflation declined for the fourth consecutive month, easing from 22.22 percent in June to 21.88 percent in July, a slowdown of 0.34 percent. Month-on-month food inflation also moderated, dropping from 3.25 percent in June to 3.12 percent in July, while core inflation showed marginal year-on-year declines and a sharp slowdown month-on-month, from 3.46 percent to 0.97 percent.

These positive trends, the centre explained, reflect a gradually stabilising macroeconomic environment supported by exchange rate stability, improved investor confidence, and import duty waivers on staples such as rice, maize, and sorghum. The base effect, following high inflationary pressures in 2022, also played a role in the decline.

However, the report warned that new concerns are emerging. Month-on-month headline inflation rose from 1.68 percent in June to 1.99 percent in July, while year-on-year food inflation increased from 21.97 percent to 22.74 percent. These developments highlight the economy’s vulnerability to supply-side shocks.

The organisation urged government to sustain reforms and prioritise foreign exchange stability to anchor inflation expectations. It also called for urgent structural reforms to tackle high logistics and import costs, insecurity, climate risks, and port inefficiencies, which continue to drive up prices.

It stressed that fiscal discipline is critical to ensure prudent government spending and to manage liquidity injections so they do not fuel inflation. It further argued that monetary authorities must innovate beyond conventional tightening tools such as the Cash Reserve Ratio and Monetary Policy Rate, given that lending rates have already climbed above 30 percent for most businesses.

While acknowledging progress in moderating headline and core inflation, the centre maintained that the persistence of food inflation and rising month-on-month prices reflects deeper structural challenges. It concluded that the July inflation report provides cautious optimism, but only a coordinated mix of monetary, fiscal, and structural interventions can consolidate recent gains and steer the economy toward sustained stability.

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