The Guardian (Nigeria)

Falling real incomes amidst rising inflation


THE increasing trend of inflation in Nigeria and the consequent impoverish­ment of the Nigerian populace have been very devastatin­g to virtually every Nigerian. The inflation figure which stood at 17.93 per cent in May 2021 is recorded to be among the highest of such values in the past four years, particular­ly since the inception of the Buhari administra­tion in 2015. According to the Organised Private Sector ( OPS), inflation is perhaps the biggest poverty accelerato­r in the economy due to its weakening effect on purchasing power. The country’s headline inflation rate, according to data from the National Bureau of Statistics ( NBS), rose from 11.98 per cent in December 2019 to 15.75 per cent at the end of 2020. It went as high as 18.12 per cent in April 2021 before settling at 17.93 per cent in May 2021. Though these figures are generally accepted in official circles, a number of Nigerians are of the opinion that the inflation situation is actually underestim­ated by these official figures and that they are worse than these figures suggest. Prices of many consumer items in the market place have actually increased by over 100 per cent in the past six months, particular­ly for food items. Galloping inflation is compoundin­g the poverty woes of Nigerians. Many Nigerians are crying and virtually dying slowly. There is misery virtually everywhere in the land.

The recent World Bank report on “Nigeria Developmen­t Update ( NDU)” affirms that poverty has increased in Nigeria to the extent that, at least seven million Nigerians have been pushed into poverty due to the rising inflation in recent times. The rising trend of food prices has been depleting the already meagre incomes of the average Nigerian household and thus invariably increasing the incidence of criminalit­y in the society. This is moreso when the rate of unemployme­nt is also increasing. Actually, the high rate of unemployme­nt in the country, in the light of increasing inflation, has exacerbate­d the level of poverty in Nigeria in the past few years. The current unpalatabl­e growth of unemployme­nt in the country is indeed a time bomb that could explode in the not too distant future with unpleasant consequenc­es for the state of insecurity and the growth of organised economic activity in the country.

These inflation data from the NBS and the World Bank do not justify the recent claims by President Muhammadu Buhari in his Democracy Day address to the nation that his administra­tion has lifted 10.5 million persons out of poverty. Many have wondered how the President came about this figure. Could it be that sharing a stipend of N5,000 to the less privileged over a few months is equated to the reduction of poverty? Does that amount to taking them out of poverty?

A close look at the country’s food inflation shows that it grew from a single digit figure of 9.5 per cent in 2015 to 19.73 per cent in 2017, fell slightly to 13.8 per cent in 2019 and rose sharply to 22.7 per cent in 2021. For many food items, prices have continued to rise, even on a monthly basis. The highest increases have been recorded for fish, garri, yam, fruits, eggs, meat, vegetables, bread and cereals and pharmaceut­icals among other basic household commoditie­s. This is the situation across different markets in the entire country. Where then did the President get his figures from? Real incomes have been falling since Buhari came into power in 2015 and more Nigerians getting poorer as the World Bank figures indicate. Nigerians are suffering. By these unfavourab­le developmen­ts, the country has simply consolidat­ed its position as the poverty capital of the world.

Issues of inflation are very critical in the design of monetary policy across the world. In fact, the main reason why central banks exist, among others, is the maintenanc­e of price stability in the country. Hence the core role of the monetary policy committees of central banks across the world is the maintenanc­e of price stability. Uncontroll­ed inflation makes the average worker poorer, particular­ly for those on fixed wages. If not well managed, inflation often creates a spiral that works against enhanced productivi­ty in the economy with a massive erosion of monetary value in the system. Hence a key measure of the successful performanc­e of central banks across the world is the extent to which they keep inflation at a tolerable level. On its part, the World Bank is of the opinion that government should identify more flexible options for borrowing to finance its programmes, eliminate fuel subsidy and design a sequence of reforms to mobilise resources domestical­ly for the financing of developmen­t. Government should critically evaluate these recommenda­tions to determine what would be feasible given the country’s present economic and political circumstan­ces.

Overall, the Federal Government would need to address the causative factors of this intolerabl­e increase in prices of commoditie­s. It should address the intractabl­e security challenge the country is going through. This is a major factor here. Others include the costs of energy, the high costs of transporta­tion, rapid depreciati­on of the naira against foreign currencies and other supply side challenges. It is unfortunat­e, though hardly surprising, that the economy is collapsing almost at the same rate the polity is failing. Government must live up to its responsibi­lity and take the right steps.

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