Nigeria Inflation Rate , Facts You Need To Know

Posted on Author S. Olawale

Nigeria Inflation Rate , Facts / What You Need To Know

Definition / Exp : Inflation is the rise in the general price level of of goods and services in an economy over a defined period of time. It is in most cases, a sustained increase in price which lead to the decrease of the purchasing power of a unit of currency. In order words, When the price level rises (inflation), each unit of currency buys fewer goods and services many the real value of the currency less. { Nigeria Inflation Rate }

Inflation is measured chiefly by finding out the inflation rate. This inflation rate is measured as the annualized percentage change in a general price index which is usually the consumer price index (CPI) over a period of time. The opposite of Inflation is deflation, which is a decrease in the rate of inflation that eventually add real value to the currency of such economy.

In Nigeria, just like other country, had always been experiencing inflation. The fact that it had been a steady and recurring occurrence doesn’t make it something not to look into. Truth is, inflation in a sustainable way is needed in an economy for the economy of such country. What becomes a problem is when the inflation is on the high side.

Truth is, inflation in a sustainable way is needed in an economy for the economy of such country. What becomes a problem is when the inflation is on the high side.

It is important however to note that inflation and deflation are a general trend and not a change in the price of a specific commodity or service. For example, when people choose to buy Golden penny Spaghetti over Dangote, this will lead to the increase of Golden Penny Spaghetti – this is not inflation, just the demand and supply forces at play.

NIGERIAN INFLATION RATE

In Nigeria, inflation rate is measured using the changes in the consumer price index over a period of time. the Consumer Price Index measures the change over time in prices of 740 goods and services consumed by people for day-to-day living. This changes are measured from both rural and urban areas in all the 36 states plus the FCT.

Food and Non Alcoholic Beverages accounts for 51.8% of total weight of the making it the most important in the consumer Price Index. Followed by Housing, Water, Electricity, Gas and Other Fuel (16.7%), Clothing and Footwear (7.7%), transport (6.5%), Furnishings and Household Equipment Maintenance (5%), Education (3.9%), Health (3%), Miscellaneous Goods and Services (1.7%), Restaurants and Hotels (1.2%), Alcoholic Beverages, Tobacco and Kola (1.1%), Communications (0.7%) and Recreation and Culture accounts for the remaining 0.7%.

The Nigeria inflation rate is currently as at August is 17.6%. This is the highest since 2010. As at Oct 2015,the inflation rate was 9.3%, by Jan 2016 it increased to 9.6%. In April 2016, it had jumped to 13.7% and by August, it had risen as high as 17.6%.

EFFECT OF THE CURRENT NIGERIAN INFLATION RATE

Some of the effects of the inflation rate are discussed briefly below :

  • Hoarding

Due to the high rate of inflation, people buy goods and hoard partly for the fear that their money may loss it value and the need to make more than enough profit since it seems the trend will continue for a while. This will lead to an increase in the price of commodity. { Part of the Fx rate challenge Nigeria has at the moment }

  • Decrease real value of money

Increased price of goods and services brings about a decrease in the real value of money making you spend more for less.

  • Social unrest, revolts and people not using their currency

Inflation can lead to massive demonstrations and revolutions against the government. In Nigeria today, we have businesses that prefer to paid in dollars as opposed to the Naira currency. This in turn leads to further devaluation of the currency.

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