Executive Summary
The human development index which measures the standard of living has been dropping since 2019. The United Nations (UN) has raised this concern as a global emergency. Economies around the world are reporting degrading key performance indicators (KPI): Gross Domestic Product (GDP) and Gross National Product (GNP). Nigerians are not isolated by the rising cost of food, rent and other basic amenities. Like many other countries in the world, the inflation rate in Nigeria had doubled or tripled in some cases since 2019.
This report seeks to shed light on the possible causes of the inflation and make recommendations to alleviate the hardship.
Recommendation
Sequel to the inflation being experienced globally, the following recommendations are suggested to alleviate the hardship in the short term and subsequently in the long term
Short Term Measures
- Households should spend only on necessities. Daily spend should prioritize “needs” and not “wants”
- Subsistent farming should be encouraged, especially in African countries where food banks do not exist. This will dampen the inflation of food prices.
- Birth control should be encouraged. This will reduce the pressure on already scarce health resources
Long Term Measures
- The governments should properly manage liquidity in the economy. People must be encouraged to spend and not hoard cash
- Investment in key infrastructure must continue. This will promote job availability.
- The International Monetary Fund (IMF) and other global financial institutions must be encouraged to revise interest rates downward to promote borrowing.
Root Causes
The following events have been identified as the root causes of the sudden and sustained inflation rate globally. They include
Covid-19 Pandemic
The covid-19 pandemic took the world by storm. The lack of preparation by countries in the world for such a health emergency resulted in a free-falling economy. All countries in the world were forced to lockdown citizens and consequently shut down their respective economies. The disease also attacked significantly the age group that accounts for the largest share of the workforce. 29 provinces with china are currently on lockdown and the ripple effects are felt in the United States of America and the rest of the world. China being the production hub of the world has created a huge gap in the supply chain yet to be bridged.
Russia-Ukraine War
The war between Russia and Ukraine also escalated the inflation rate. Russia and Ukraine are agricultural powerhouses and account for about 30% of the world’s supply of grains and fertilizer. The numerous sanctions, owing to the war, has consequently impacted the free movement of goods and service. Gas supply has been cut from industrialized nations of the world. All these factors have led to a rise in the cost of production and resultantly cost of goods sold.
Conclusion In conclusion, the events identified above are both force majeure and require the countries of the world to collaborate to find a long term solution to the hardship. In the meantime, the short term measures will dampen the hardship caused by the inflation. Nigeria in particular needs to revisit its macroeconomic policies in the best interest of Nigerians.
