In spite of the fact that political unrest has never been brought on by high inflation in Nigeria, the geopolitical intelligence platform SB Morgen cautions that this tendency may soon reverse itself if the government does not act quickly to “responsibly” control the present rise in prices.
The research, which charts Nigeria’s inflationary trajectory since independence, examines what causes inflation and contends that productivity problems have been in the nation since the 1970s.
“To increase Nigerians’ productivity and the country’s economy, drastic measures must be implemented with extreme attention. This will be accomplished by raising educational standards, providing infrastructure and equipment, and protecting people’s lives, property, and property rights.
A greedy elite continues to use mantras that became ingrained in the book years of the 1970s to mobilize the populace against reforms that would ultimately be better for the nation, the report states. “Education will also include disabusing the Nigerian psyche from destructive mantra such as equating the strength of the economy not with its productivity but with the strength of the currency,” the report states.
It emphasizes how the social fabric of cohesion breaks down as people’s purchasing power decreases and they are unable to buy necessities. According to it, this heightens political unrest and societal unrest. It contends that this explains why preserving price stability is given significant attention in modern economies.
The research claims that with increased productivity and reasonable inflation rates, Nigeria’s standard of living will greatly improve. However, this can only happen with measures that lessen “structural productivity inhibitors.”
It questions the likelihood of achieving the single-inflation-rate aim established by the monetary authority, noting that the nation only succeeded in doing so in 25 out of the 62 years following independence. It says that since independence, “it is apparent that our ability to achieve this has decreased on a decade-by-decade basis.”
It further notes that between 1960 and 1969, there were just three instances of deflation in the nation. A negative inflation rate of 2.7% was recorded in 1961, followed by negative inflation rates of 3.7% in 1967 and again in 1968. (0.47 per cent).
It examines the many policy measures adopted by succeeding governments to reach a single-digit inflation rate and comes to the conclusion that the majority of these measures were not very effective. It claims that determining the function of money supply in price instability was greatly influenced by the discovery of hydrocarbons and the ensuing oil boom.
“Oil money had instilled a new paradigm—one of an unending flow of money during a boom—into the minds of Nigerians. It recalls the Udoji Award in 1974, when the government effectively gave money to civil officials, which caused a dramatic boost in purchasing power, regretting the fact that the increase in money supply was not matched with equivalent production.
“The demand that the public employees flush with cash provided was too great for the private sector, which was the engine of production, to rise to fulfill. In addition, as traders battled to replenish their commodities at the prices the restrictions compelled them to sell at, the price controls put in place in 1971 were starting to cause serious shortages in necessities. In response, demand-pull and cost-push immediately pushed inflation into the double digits in 1974, hitting 12.67 percent, and a black market started to flourish.