By Oyeremi Abdulrasaq Omobolaji

What is inflation?

Inflation is an economic concept that refers to the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

Inflation can be caused by a variety of factors, such as an increase in production costs, a decrease in the supply of money, or an increase in government spending. When the cost of goods and services goes up, each unit of currency buys fewer goods and services; therefore, inflation reflects a reduction in the purchasing power of money.

Increase in the rate of inflation in Nigeria

Inflation in Nigeria picked up again in January, hitting 21.82% in annual terms, driven by higher food inflation, its statistics agency said on Wednesday. Inflation had risen in Africa’s biggest economy for 10 straight months, prompting a string of interest rate hikes from the central bank, before a dip to 21.34% in December. Food inflation, which accounts for the bulk of Nigeria’s inflation basket, rose to 24.32% in January from 23.75% in December.

“The contributions of items on a class basis to the increase in the headline index are: bread and cereal, actual and imputed rent, potatoes, yam and tuber, vegetable and meat,” the National Bureau of Statistics said in its inflation report.

Policymakers have linked inflationary pressures to Nigeria’s infrastructure problems and the fact that a lot of items people consume are imported.

Central Bank of Nigeria (CBN) Governor Godwin Emefiele has said the bank will maintain a hawkish stance on rates if inflation remains elevated. The CBN hiked its key interest rate to 17.5% in January, meaning there have been 600 basis points of rate hikes since last May.

Negative effect of inflation on Nigeria’s economy

The problem of the high inflation rate in Nigeria is a source of concern to both the rich and the poor. The poor in Nigeria cannot afford the prices of commodities in the market. The vulnerable cannot eat twice a day due to the high inflation rate. The household consumers are the ones feeling the heat of high inflation.

The prevailing high inflation in Nigeria is eroding the value of money, which may likely reduce investment and the real GDP growth rate in 2022. All items’ prices shift upward on the other market day. Nigeria’s prices do not obey the law of gravity as prices keep rising instead of falling.

Selected food price watch for May 2022 showed that the average price of 1kg of beans (white, black eye, sold loose) rose on a year-on-year basis by 37.22 percent from N382.37 in May 2021 to N524.70 in May 2022. On a month-on-month basis, this increased by 1.09 percent from N519.05 in April 2022. The average price of 1kg of a yam tuber increased yearly by 37.87 percent, from N269.98 in May 2021 to N372.23 in May 2022, the National Bureau of Statistics (NBS) reported.

Many Nigerians now buy lesser quantities of consumables due to the prevailing high prices in the market. High inflation is killing the economy, and Nigerians need to be saved from the imminent collapse of the economy.

Nigerian producers are also feeling the pains of high prices as the cost of production has risen, and have become so frustrating to contribute meaningfully to the national output. The prevailing situation in the manufacturing sector can worsen the inflation problem confronting the economy. It is high time actions were taken to save the Nigerian economy.

High inflation in Nigeria can be attributed to a drop in the supply of agricultural products to the market. Many Nigerian farmers in the Middle-Belt and North-East states have not returned to farming due to the fear of being killed or raped by bandits. Many other farmers are still practising small-scale farming methods. Nigeria’s population calls for mechanised agriculture to produce a large quantity and number of agricultural products for consumption.

Nigerians need a leader with a different value system to help rescue the economy and the poor people from the issues of high inflation. Only a leader who understands the pain high inflation has inflicted on Nigerians will be able to save the economy. A leader who has the interest of the people at heart, and who does not embezzle public funds will be able to envision a great Nigeria and strive to restore value to the naira.

Nigeria’s survival and continued existence depend on the outcome of the next general elections. Nigerians must resist any urge to sell their votes to politicians. All Nigerians, irrespective of their tribe, language, and religion must jointly decide on who is competent to rescue the Nigerian economy from the impact of high inflation and bad economic policies.

The enormous problems confronting the Nigerian economy call for the considerate selection of a leader who has a broad view of the problems and possesses the capacity to remedy the pitiful economic situation of the country.

Omobolaji is from Dept of Mass Comm, Faculty of Information Communication Technology, Kwara State University