The Plague of Rising Inflation, by Dakuku Peterside

An increasing number of Nigerians are being pushed into poverty, not by choice, but by the current political and economic environment shaped by stringent macroeconomic policies. These policies, such as the removal of subsidies, the devaluation of the naira and the increase in electricity tariffs, have had unintended consequences. For example, the removal of subsidies has led to a significant increase in the cost of living, while the devaluation of the naira has made imported goods more expensive. These factors, combined with high levels of insecurity, have affected Nigeria’s food security and created a perfect storm of economic hardship. The signs of this inevitable reality are clearly visible. The interventions to prevent this descent into poverty have been ineffective or correct the condition too slowly.

An unprecedented rise in inflation has destroyed household disposable incomes and pushed many families into poverty. Rising inflation is having a devastating impact on everyone, but especially on households in the lower strata of the working class, millions of whom join the already more than 133 million multi-dimensionally poor Nigerians struggling to make a living because of high inflation. has eroded the value of the economy. their income. As shown in the April NBS Consumer Price Index, published in May, headline inflation rose to 33.69 percent in April compared to March. Overall inflation in April was 11.47 percent higher than the previous year. During the same period, inflation was higher in urban areas than in rural areas. Worse still, food inflation stood at 40.53 percent in April, an increase of 15.92 percent compared to April 2023. What does this mean for ordinary citizens? More money can buy fewer goods and services.

We cannot ignore the direct correlation between rising inflation and rising poverty in Nigeria. A household with a monthly income of N300,000 in April 2023 would have lost 33.69 percent of its real purchasing power if it had earned the same amount in April 2024. This means that the same amount of money can now buy significantly fewer goods and services, putting pressure on the household budget. Imagine if this household was struggling to make ends meet in 2023; How will the country cope with less than 33 percent of its value in goods and services this year? It is no wonder that many Nigerians are desperate and calling on the government to change its policies and save the situation before it is too late. In fact, families in the income bracket mentioned above are better than many families with a total income of less than N100,000, if both parents in the household earn the minimum wage per month.

Government intervention so far, with the best of intentions, has yielded little results as inflation continues unabated. The monetary policy of raising the base interest rate to above 22 percent, improving the banks’ cash reserve ratio to above 40 percent, and continuously using the money market to mop up excess liquidity have been instrumental in curbing inflation delivered less than expected. More is needed, and my little knowledge of the street economy shows me that the Nigerian economy often challenges some of the basic economic concepts that operate in developed countries due to the informal and unregulated nature of our economy. The Nigerian government must creatively use other tailored and practical fiscal and monetary measures to curb our raging inflation.

Paradoxically, there is compelling evidence that inflation continues to rise as a result of critical government policies. Instead of taking more coordinated anti-inflationary measures, the government has added more inflationary measures to the economy. The government cannot tackle inflation and at the same time impose unlimited taxes, tariffs and fees on the things people spend money on every day. The impact of excessive taxes affects everyone, but the burden falls more on people living in poverty whose purchasing power has been eroded by inflation. The government cannot tax itself out of our economic situation. Increasing personal income tax is one way the government reduces disposable income to curb demand inflation, but inflation in Nigeria is not due to an increase in household income but is caused by cost-related factors. So taxing people whose incomes haven’t increased in the past year is a recipe for hardship.

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Other factors are also jeopardizing government efforts to curb inflation. Imported inflation has been the bane of Nigeria given the number of raw materials and goods imported into Nigeria from countries with high inflation rates. This is not helped by the new exchange rate regime that has seen the naira fall to its lowest value in a generation. The government has tried in vain to control the erosion of the value of the naira. Rising energy costs have prompted some companies to step up. These factors have exacerbated the rise in inflation, and unless the government addresses them, it cannot effectively win its battle against runaway inflation.

The consequences of inaction are serious and far-reaching. The system requires a series of anti-inflationary measures to relieve the burden on people and businesses, so that living standards can improve and real incomes can recover from the shock, to encourage people to live and save. Savings and prosperity will boost investment, production, supply and resulting demand. If inflation worsens, the economy will at best enter stagnation, further regression and possibly a depression. More manufacturers will shut down, and unemployment will worsen with even more crime and insecurity. The picture I painted above is not far from us.

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Recent statistics on the level of hunger in Nigeria caused by food inflation are alarming. There is a worsening food security and nutrition crisis in Borno, Adamawa and Yobe (BAY), according to this lean season between May and September 2024. According to the government-led Cadre Harmonize analysis released in March this year in Borno , Adamawa and Yobe In the United States, an estimated 4.8 million people are experiencing severe food insecurity, the highest level in seven years. Children, pregnant and lactating women, the elderly and people with disabilities are among those most vulnerable. About 2.8 million of these people require urgent interventions.

Prices of staple foods like beans and corn have risen 300 to 400 percent in the past year for a cocktail of reasons. Inflation is outpacing families’ ability to cope, making essential food items unaffordable. Furthermore, the report stated that “malnutrition rates are a major concern. It is expected that approximately 700,000 children under the age of five will be acutely malnourished in the next six months, including 230,000 who are expected to be severely acutely malnourished and at risk of death if they do not receive timely treatment and nutritional support.” The Acting Representative of UNICEF Nigeria states that “this year alone we have seen approximately 120,000 admissions for the treatment of severe acute malnutrition with complications, which far exceeds our estimated target of 90,000”. These statistics apply to only three states in Northeastern Nigeria. Imagine what it will be like for all 36 states in Nigeria. There is real fire on the mountain!

This increasing hunger is not unique to the Northeast. From my knowledge of the street economy, hunger and poverty are ubiquitous in all six geopolitical zones. Increasing poverty is directly linked to more severe economic consequences. Increasing poverty can result in a more divided society. Housing problems, homelessness, limited access to healthcare, nutritional poverty and poor living conditions that have a detrimental effect on health. Children living in poverty have less access to education, which will reduce their chances in the future. More and more families facing poverty will experience conflict, stress and domestic violence. Poverty can set in motion a vicious circle in which its consequences act as a catalyst for new episodes of poverty. Rising inflation and poverty are bad omens that do us no good. They are bad for our economy. They are bad for our people. The government must pay attention to these factors and be more sensitive in our economic policy choices.

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Only a few anti-inflationary measures that fully encompass the macroeconomic dimensions and provide solutions can work. Anti-poverty measures are hardly temporary and at best work in the short term to cushion the effects of increased inflation and food insecurity. The government must provide solid medium to long-term solutions to address these issues. They need to reevaluate some of their policies to see if they are inflationary, and throw them out so that good policies can thrive. We can only imagine the unintended consequences of allowing poverty and inflation to fester. Increasing inflation and poverty are causing despair among a section of society, which is becoming increasingly despondent and sees itself on the margins of society. The implications of this are plausible. Many ordinary citizens suffer from poverty, hunger and severe inflation, which have made their lives miserable. The government must take action to alleviate this scourge and help Nigerians live meaningful lives.

Dakuku Peterside is a public sector turnaround expert, leadership coach, analyst and public policy columnist.

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