What’s up with the inflation?
I want to live, not just survive.
If I got a dollar for every silent curse an angry Nigerian had muttered under their breadth at the current administration, I’d have become rich. It’s crazy because as young people, we expected our 20s to be spent in building wealth mode, not in survival mode.
A cookie I bought for 300 Naira, five years ago now sells for 1,900 Naira, that’s an 84% increase! (I hope I did the right calculation tho) This led me to the question, what’s up with the inflation in Nigeria?
Before I begin my rant, I want you to know that inflation happens in every country, so I brought in my little chart that shows the inflation rate for some countries in the last 11 years, for comparison.
Crazy innit? Now you see why some Nigerians mutter curses under their breath.
But wait, I saved the best for the last, 2024. As of July 2024, the inflation rate in Nigeria was 33.4%, almost a 10% increase from the previous year. I’ll pause here for you to catch a breath, and scream if you want to.
What really caused this inflation?
In the mind of Nigerians, it started on the 29th of May 2023 when our current administration was inaugurated. I can recall the confusion on the faces of people when they pondered on the speech the president had made that included the removal of fuel subsidies.
The speech went something like “…Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions…No provision is made for fuel subsidy, fuel subsidy is gone!” This was followed by a round of applause.
In case you don’t know what a fuel subsidy is, It is financial assistance provided by the government to reduce the cost of fuel for consumers. It attempts to lower the fuel cost by providing direct financial support to oil firms, thereby lowering the fuel price for Nigerians. Its removal meant that citizens get to pay the full price for the fuel they buy.
Before you bash the administration, look from their POV, they were trying to “prevent the country from going bankrupt”, and to channel the money into more profitable things like healthcare, the transportation sector, schools, housing, and national security, among others (still waiting on those amenities to materialize). Also, crude oil prices increased globally because major oil-producing countries cut down on their supply of crude oil.
The next day, we woke up to find out that the price of fuel had gone from 185 Naira per litter to 540 Naira per litter, which has since increased to 960 Naira per litter in the last few months. But was this really the pivotal point that skyrocketed the inflation rate? It’s one of them.
The major influencer of inflation in Nigeria is the devaluation of Naira. Pictures speak a thousand words, so you know I had to bring in my little chart again. Below is the average exchange rate of one Dollar to Naira from 2012 to 2014.
I can’t unsee the correlation between the removal of fuel subsidies and the increase in the exchange rate. Why is Naira being devalued? And I would stop here lest I lose your interest in the upcoming articles.
One reason is the declining supply of Dollar into the country while the demand for Dollar remains the same, this is fueled by our dependence on imported goods. Foreign exchange inflow, which represents supply, comes from export earnings, diaspora remittances, foreign investment, foreign aid, external loans etc. For a country that produces crude oil, you’ll be surprised to hear that we import crude oil (facepalm).
I’ll stop here. Next time, I’ll be talking about our crude oil sector, so subscribe!
Till next time,
Love and Light.