Inflation in Nigeria: Causes, Control & Solutions

Inflation in Nigeria

Inflation is a worldwide phenomenon but the rate varies from country to country.

Nigeria has been experiencing a high rate of inflation estimated to be well over 45%. Despite the various measures adopted to control inflation it has defied solutions.

Causes of Inflation in Nigeria

• The causes of inflation in Nigeria are not different from the ones in most Third World countries. They include:
• Excessive government spending and use of budget-deficit.
• Rapid increases in the cost of production.
• Poor storage facilities.
• Inadequate distributive system.
• Low domestic productivity in industry and agriculture.
• Increases in the prices of imported goods and services.
• Frequent wage increase. This leads to excess demand for certain goods and services.
• Excessive expansion of bank credits.

Reasons for failure of measures aimed at controlling inflation in Nigeria:

• Difficulty in cutting down government expenditure due to the increasing demand for better infrastructual facilities and the need to create more employment opportunities.
• Ineffective price control due to bribery and corruption, poor transportation facilities etc.
• Inability to control wages: These result in frequent industn’al actions by workers.
• Poor distributive system which creates bottlenecks in the distribution of goods and services.
• Poorly developed money and capital market which renders the use of monetary policy ineffective.
• Inability to increase domestic output due to bottlenecks in production.