Inflation in Nigeria is at an all-time high of 18.5% . Inflation is the rate of increase in prices over a given period of time. It affects the purchasing power of the local currency. In a nutshell, in a country like Nigeria where the inflation rate is high, you become poorer as the local Naira loses value by the day. American business magnate Ross Perot said that “a weak currency is the sign of a weak economy, and a weak economy leads to a weak nation”. This perfectly summarizes the state of Nigeria. It may also seem as though, nothing is being done about it in terms of how the government reacts and put in measures to mitigate the increase in inflation. This encourages Nigerians to spend and stock up on things that are slow to lose value like saving the money in a more stable currency like the Euros and dollars as well as purchasing physical assets such as gold. I recall attending a course on Finance for Non-Finance Managers and the facilitator who was Indian asked for the Inflation rate of Nigeria and we said it was at 15%, he was astonished and asked how we survived.
Recently I went grocery shopping, I usually spend on an average about ₦30,000 per month buying the needful for the month. Lately, in the last 3 months, I have been spending roughly ₦45,000 buying the same thing. Common commodities like a bag of sachet water are sold at ₦200, double the price it was sold last year. It is not sustainable. Some of the common effects of inflation includes a Weaken Naira There is currently trending news on social media where foreign airlines are considering not accepting the Naira as a result of inflation. The naira loses value the moment they receive it and it is difficult to repatriate its dollar profit as a result of tight foreign currency control by the Nigerian government. A weakened naira affects businesses in the sense that importers are faced with a massive exchange rate to deal with and in turn transfer the cost to the end-user. A weakened Naira means that people will no longer save money in naira and would prefer to save money in foreign currencies. A weakened naira means that a graduate could be paid a ₦100,000 which is roughly $170 at the beginning of his/her career and when their salary is increased to ₦200, 000 with the current rate of inflation they could still be earning $170.
The current level of inflation also prevents investors from coming into the country. There is a study that showed that countries with persistently higher inflation are likely to have lower levels of investment and stagnant economic growth.
To be continued