Taming Rising Inflation In Nigeria

As the rise in inflation rate further darkens the ominous clouds gathering over Nigeria, raising the fearsome spectre of economic ruin, the World Bank has said the Federal Government did not take any collaborative action towards inhibiting inflation in 2021 regardless of inflation shock pushing an estimated eight million Nigerians below the poverty line.
That was in the latest issue of the Washington-based bank’s 2021 report, ‘Nigeria Development Update’. It said, “Double-digit inflation rates are depressing economic activity and exacerbating poverty. Rising food prices are eroding household purchasing power, and we estimate that during 2020 and 2021, the ‘inflation shock’ alone pushed about eight million more Nigerians below the poverty line.
“We have revised our inflation forecast upwards from our June projection because (i) the inflation rate is declining more slowly than initially expected, and (ii) during 2021, the government did not take concerted action to curb inflation.” The World Bank further warned that without any definitive action, the average inflation rate would not reach the single-digit target of the CBN by the end of 2022.
The Central Bank of Nigeria (CBN) had recently envisaged that the country’s inflation rate would drop to a single digit in 2022, with the full implementation of its recent policies designed to advance different sectors of the economy. However, a US-based magazine, Global Finance, agreed with the World Bank that the CBN had failed to rein in inflation and prevent the Naira from slipping against the dollar.
According to a World Bank prognosis, Nigeria could have one of the highest inflation rates in the world in 2022, with rising prices driving down the well-being of Nigerian households. The report also indicates that the country is similarly expected to have the seventh highest inflation rate among countries in sub-Saharan Africa this year.
There is a widespread rise in consumer goods prices as the economy has been marked by the COVID-19 recession, insecurity, the foreign exchange market crisis, unemployment and income shortfall. The sudden decline in the value of the currency has led to re-priced imported goods and raw materials. As prices are rising rapidly, the feasibility of hyperinflation and its collateral fallout is substantial.
Recall that the World Bank had warned in June 2020 that the crash in oil prices coupled with the COVID-19 pandemic would hurtle the Nigerian economy into an austere economic recession, the worst since the 1980s. The abandonment of the national rescue effort solely to the inept administration of President Muhammadu Buhari has proved a disaster.
Though key fiscal and monetary policymaking lies primarily with the Federal Government, states need to make profound changes in their spending and revenue generation template and run independent, self-sustaining economic units. They must expand the frontiers of their economies and develop viable economic programmes for job creation.
Nigeria’s annual inflation rate was 15.60 per cent in January, 2022, little changed from 15.63 per cent in the previous month. There was a slight deceleration in prices of major food components (17.13 vs 17.37 per cent in December). Meanwhile, inflation was higher for almost all other categories, primarily clothing and footwear (15.4 vs 15.1 per cent); transport (15.1 vs 15 per cent); furnishings (14.6 vs 14.5 per cent); miscellaneous goods and services (14.4 vs 14.1 per cent) and alcoholic beverages and tobacco (14.1 vs 13.7 per cent).
The annual basic inflation rate, which excludes farm product prices, remained unchanged at 13.87 per cent in January, the highest rate since April, 2017. Each month, consumer prices rose by 1.47 per cent, following a 1.82 per cent increase in the previous month. This is reflected in the report of the Consumer Price Index (CPI) of the National Bureau of Statistics (NBS).
But the cold figures reflect somewhat the misery of ordinary Nigerians or the ferocious headwinds faced by businesses. Nigeria is on the cutting edge of terrorism and cattle politics. The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, has rightly ascribed the inflationary pressure to the worsening security situation in many parts of the country, particularly the food-producing areas where farmers face continual incursions by herdsmen and bandits in their farms. It has made food inflation worse.
The Edo State Governor, Godwin Obaseki, blew the lid open on the Federal Government/CBN template of printing money for sharing among the tiers of government to make up for revenue shortfalls. Emefiele’s argument that it was a normal government loan was not reassuring. Economists believe that unrestrained, printing money consistently faster than the growth of real output could result in hyperinflation, exorcising fearful images of Germany’s experience in the 1920s and Zimbabwe’s more recently.
To save the day, the CBN should review its inflationary tradition of converting dollar revenues into Naira for sharing by the federal, states and 774 local governments as long canvassed by the late economist, Henry Boyo. It should be essential to reshape the business climate to curb currency accumulation and capital flight and to attract foreign direct investment.
Insecurity must be contained; the national siege by murderous herders, bandits, terrorists and kidnappers must be stopped to allow agriculture, mining, transport and trade to fully resume. The government should open the economy to investors by privatisation free of corruption. That way, we can have a more productive economy.