Inflation: Nigeria is not alone -By Tife Owolabi

The energy crisis, covid 19 and the war between Ukraine and Russia have not help either in the inflation saga . These have far-reaching complications for every product.

Inflation is the increase in the price of goods and services in an economy. It translates to reducing the purchasing power of a currency. Measured by the Consumer Price Index (CPI), Inflation shows the impact of price changes for various products and services; it provides a single value representation of the increase in prices.

For any economy, inflation is a complicated phenomenon. While moderate inflation is suitable, it can create a disastrous economic situation if it exceeds a certain level.

Factors for inflation are Disruption in Supply and Poor Government Policies among other factors contributing to inflation aside from oblivious issues beyond their control.

Ghana’s economy is struggling to survive as inflation continues to dictate its fall. The implications of the continuous fall of the Cedi is already being felt by the ordinary Ghanaian.

In a recent report by the Skynews it reported that Inflation in United Kingdom hits double figures , soaring to new 40-year high as cost of living crisis deepens.

The effect is an upsurge food costs were the biggest driver of the latest hike, according to the Office for National Statistics, with annual inflation for these items now running at 12.7%, up from 9.8% in June, fuelled largely by price rises for basics such as bread, milk, cheese and eggs.

With this we are not alone but what are the low-hanging fruits the regime is using as palliatives to ameliorate or cushion the effect of inflation ? This is what is missing in the Nigerian context .

The National Bureau of Statistics (NBS) said Monday the country’s inflation rate in July was 19.64% – the highest rate since September 2005. A NBS report found the highest increases were for necessities like food, fuel, transportation and clothing.

Government must come up with plans such as monetary policy, etc to reduce the hardship .One according to a Forbes report, one significant monetary way to curb Inflation is to control the money supply in the economy. If the money supply goes down, the demand for goods will reduce, causing a price fall. Another way to curb the money supply is when the government withdraws specific paper notes or coins from circulation. Lowering the lending rate for commercial banks allows money circulation to be controlled. The Central Bank can also block commercial banks’ money by issuing government securities.

Two , a Fiscal Policies . The two essential components of a fiscal policy are government revenue and expenditure. The government can change its tax rates to increase revenue or efficiently manage expenditure. An inflationary gap is created when the demand is higher than the supply. The government can tackle this in two ways.

“One, by decreasing the overall government expenditure and transfer payments. Two, increasing the tax rates leads to decreased individual demand and a drop in the economy’s money supply.”

Why it a fact that inflation is a global phenomenon but government approach matters. Naira is at free fall , we are not producing to earn more and the oil production is at the lowest ebb due to frequent attacks on oil facilities.

Shell in its latest press issued after a spillage in Bodo community , Ogoni,Rivers state said “ The spill from the Bomu-Bonny section of the SPDC JV’s Trans Niger Pipeline (TNP) in Bodo, Gokana Local Government Area of Rivers State on 3 August 2022 was largely water (98%) from the ongoing flushing of the TNP, with residual crude oil of about five barrels as established by the signed report of the Joint Investigation Visit led by regulators, and involving representatives of the Rivers State Ministry of Environment and the community. Owing to the high level of theft, the SPDC has not processed crude oil through the TNP since mid-June 2022. Cleanup of the impacted area and repair work on the pipeline are under way,” a spokesman said .

Nigeria is in a dire straits and an urgent solutions are needed to assuage this hardship as pundits have predicted that the inflation rate will increase further in coming months and may put many more Nigerians on the brink of poverty.

Tife Owolabi
Journalist
Niger Delta
@tifeowolabi