MEASURES TO COMBAT INFLATION IN NIGERIA

ABSTRACT

Inflation remains a significant economic challenge, particularly in developing nations like Nigeria. This research delves into the measures employed to combat inflation in Nigeria, examining their effectiveness and impact on the nation’s economy. Through a combination of questionnaire surveys and extensive library research, this study investigates government policies implemented between 1961 and the present, providing an appraisal of their outcomes. Inflation in Nigeria dates back to the civil war era (1965–1970), when a sharp increase in the prices of essential goods, such as rice and sugar, highlighted the issue. Since the late 1970s, inflation has steadily risen, becoming a persistent concern for both the government and citizens. The study identifies the underlying causes of inflation, including excessive money supply relative to available goods and services, and explores the role of hyperinflation in specific sectors, such as oil. The research underscores the importance of understanding inflation, not only as an economic phenomenon but also for its broader implications on the cost of living and equitable access to resources. The findings offer actionable recommendations for addressing inflation and achieving economic stability in Nigeria, contributing to improved fiscal policies and public awareness.

Keywords

Inflation, Economic Stability, Inflation Control, Nigeria Economy, Price Levels, Hyperinflation, Creeping Inflation, Monetary Policy, Fiscal Policy, Supply and Demand

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CHAPTER ONE

1.0 Introduction

Inflation is one of the most persistent and critical economic challenges facing many nations, especially developing countries like Nigeria. It represents a continuous rise in the general price level of goods and services, which erodes purchasing power and adversely affects the economy. According to Webster’s New Collegiate Dictionary, inflation occurs when the volume of money and credit exceeds the availability of goods and services, resulting in a significant and sustained rise in prices. Three fundamental elements underpin the concept of inflation:

1. An increase in the volume of money and credit.
2. This increase surpassing the rise in goods and services.
3. A substantial and continuous rise in the general price level.

Understanding these elements provides a clearer perspective on the dynamics of inflation. Inflation arises when demand for goods and services outpaces supply, causing prices to rise. In economic terms, inflation can be described as an excess of demand over supply at current prices.

1.1 Background of the Study

The phenomenon of inflation in Nigeria dates back to the civil war era (1965–1970), where the sharp rise in prices of basic commodities such as rice and sugar became a national concern. For instance, a bag of rice costing ₦14 before the war escalated to ₦43 immediately afterward. Although prices normalized slightly by 1977, inflation remained a persistent issue. From the late 1970s to the present, the steady rise in prices has posed significant challenges for the Nigerian government and its citizens.

Inflation has become a household concern in Nigeria, affecting every individual. The rising cost of living and the diminishing value of money have made inflation a pressing economic issue that demands urgent attention. This study delves into the causes of inflation, its impact on the Nigerian economy, and the measures employed to address it.

1.2 Statement of the Problem

Inflation has led to widespread dissatisfaction among Nigerians, as it erodes purchasing power and diminishes the quality of life. The issue has become even more pressing as the prices of goods and services continue to rise without a proportional increase in supply. Despite various measures taken by the Nigerian government to combat inflation, including monetary and fiscal policies, the problem persists.

This study seeks to investigate the root causes of inflation in Nigeria and assess the effectiveness of measures implemented to curb it. Additionally, the research will provide recommendations for addressing this economic challenge to foster stability and improve living standards.

1.3 Objectives of the Study

The primary objectives of this study are:

1. To identify the causes of inflation in Nigeria.
2. To examine the measures employed to combat inflation.
3. To evaluate the effectiveness of these measures.
4. To recommend strategies for achieving sustainable economic stability.

1.4 Significance of the Study

Understanding the causes and consequences of inflation is crucial for policymakers, economists, and the general public. This study is significant in the following ways:

1. It provides insights into the dynamics of inflation and its impact on the Nigerian economy.
2. It offers a critical evaluation of existing measures to combat inflation, highlighting their strengths and weaknesses.
3. It proposes actionable recommendations for reducing inflation and stabilizing the economy.
4. It serves as a valuable resource for researchers and policymakers aiming to address similar economic challenges.

1.5 Scope of the Study

This study focuses on inflation in Nigeria, specifically examining its causes, types, and the effectiveness of measures implemented to control it. The scope encompasses an analysis of inflationary trends from the civil war era to the present day. Additionally, the study evaluates various forms of inflation, such as creeping, walking, running, and galloping inflation, to understand their impact on the Nigerian economy.

1.6 Definition of Terms

To ensure clarity, the following key terms are defined:

• Inflation: A continuous rise in the general price level of goods and services.
• Hyperinflation: An extreme and rapid increase in prices, often exceeding 20–30% monthly.
• Creeping Inflation: A slow and steady rise in prices, typically less than 3% annually.
• Demand-Supply Gap: A situation where demand for goods and services exceeds supply, leading to price increases.
• Monetary Policy: Government actions aimed at regulating the money supply to achieve economic stability.
• Fiscal Policy: The use of government spending and taxation to influence the economy.

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