‘World Bank Projects Worsening Inflation Rate In Nigeria’

With increasing prices of things in the country, which is diminishing the welfare of Nigerian households, the World Bank has said that Nigeria may have one of the highest inflation rates in the world, this year.
The bank in its latest edition of its Nigeria’s Development Update, noted that the country is expected to have one of the highest inflation rates in the world, and seventh in the sub- Sahara Africa in 2022.
According to the global financial institution, high inflation hampers the country’s attempt to achieve economic recovery and erodes the purchasing power of most vulnerable households.
“High inflation is frustrating Nigeria’s economic recovery and eroding the purchasing power of the most vulnerable households. In the absence of measures to contain inflation, rising prices will continue to diminish the welfare of Nigerian households”, it stated.
The bank further highlighted the adverse effects of inflation on Nigeria, which include pushing eight million Nigerians into poverty, and the possible disruption of consumption, investment and saving decisions, among other consequences.
“If inflation had been closer to the CBN’s goal of nine per cent in 2021, the average Nigeria’s consumption would have been 15 per cent higher, and eight million Nigerians would have not fallen into poverty.
“If double-digit inflation persists during 2022-2023, rising prices will distort consumption, investment, and saving decisions of the government, households, and firms, with adverse ramifications for long-term borrowing and lending.
“Over time, the disproportionate impact of inflation on lower-income households and those working in sectors with low savings (e.g, agriculture) will exacerbate inequality. Ultimately, inflation will not only negatively affect incomes, but also economic productivity and job creation, further constraining the recovery”, the bank said.
The Washington, United States-based institution, also disclosed that over two years, an increase in food prices accounted for about 70 per cent of the annual increase in the rate of inflation.
It also said that inflationary pressures were triggered by multiple demand and supply shocks.
“Inflationary pressures are being generated by multiple demand and supply shocks. Supply shocks arising from disruption of supply chains linked to Covid-19 and associated containment measures have eased, but security issues, border closures, and limited access to markets continue to fuel inflation.
“The current mix of monetary, fiscal, foreign exchange, and trade policies also plays a prominent role as a driver of inflation. Trade and FX restrictions, including the closure of land borders starting in August 2019, have increased prices for food and consumer goods, and imports of over 40 goods, including many staple foods, are currently ineligible for FX through formal windows.

By: Corlins Walter