Nigerian politics and inflation

Posted by Felix Okoli on Saturday April 5, 2014 at 15:55:5:

Whenever there is a general increase in the prices of goods and services, causing a devaluation of a country’s currency, we say that an inflation has occurred.

In Nigeria, the prices of goods have been fluctuating from time to time depending on a lot of factors one of which includes politics. This causes people to spend more money and yet get less reward.

As at February 2014, a 7.7% increase in the rate of inflation was recorded in Nigeria which is a bit better than some previous years.

In Nigeria, there seems to be a direct relation with inflation and politics. During election year, there is always a lot of money being spent and some of these money are borrowed from banks. The money ends up being used for lobbying voters to vote for candidates and this eventually gets sucked up into the economy as voters end up having more purchasing power and this generally increases the price of goods and services. A person with a higher purchasing power hardly wastes time negotiating for prices of services and goods since he can comfortably pay for it.

CAUSES OF INFLATION:
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Inflation can be caused be any of the following factors;

- When there is a higher demand for a particular product, manufacturers tend to increase cost in order to meet up with demand

- A reduction in direct and indirect tax on commodities

- When there is a rapid push of money into the economy. That happens when more money is being printed.

- When then is depreciation in the value of the Country’s base currency.

EFFECTS OF INFLATION:
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- When there is an increase in the prizes of goods and services and there is no increase in the income of workers, it reduces their purchasing power of income earners.

- Saving of money in banks will be meaningless due to the effect of inflation, as money saved in the bank will continue to loose its value as inflation continues.

Ways to Control inflation in Nigeria:
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- The Federal govt can control inflation through fiscal and monetary policies which includes taxation, expenditures and budgets.

- Banks can increase interest rate on bank loans to discourage people from borrowing money for spending and investments.

- Banks should encourage savings by increasing the interest rate on saving accounts, this will encourage people to save and spend less of their income.
-General prize of certain goods should be regulated to discourage manufacturers from over charging customers