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.