Inflation rate for Nigeria from 1970-2008

Inflation rate for Nigeria from 1970-2008

Nigeria, having such population of about 100 million, remains highly dependent upon agricultural sector with approximately 70 percent of population still living in rural areas and deriving their livelihood from the land. Nigeria’s contribution to GDP has been decreasing for over two decades and the position of the country has shifted from self sufficiency in agricultural production in the early 1960s to now being major importer of food and raw materials for domestic industries. Ideally, inflation in Nigeria remain debated economic issues as there accounts to a form of inflation for example, the persistent tendency for certain prices to increase thus, having consensus on the impact of exchange rate changes on inflation as being achieved.

Indeed, average inflation during the period  of early 1960s up to the year 1972 which as been relatively low, Nigeria’s historical average rate being 5.01 percent. When assessed on an annual basis, however, rising prices became a cause for concern for the then military government when in 1969 the inflation rate hit double digits at 10.36 percent. Nigeria government’s concern seems to have been justified by the fact that Nigeria was experiencing double-digit inflation for the first time, in the face of a raging civil war whose end was not then in sight. In reaction, government imposed a general wage freeze for a period of one year. Apparently aware of possible opposition by labor unions, price control measures were introduced with the official promulgation of the Price Control Decree in Nigeria from the early years of 1970 to 1975.  (1984), adheres for comprehensive discussion of anti inflation measures taken during the era as such, Nigeria’s inflationary pressures continued unabated, however, even with price controls.

 

 

For instance, oil in Nigerian economy has been factored as hindrance to its economic progress as it created booming mode of economic management. The oil boom of  1970s, concomitant of soaring international oil prices, resulted in substantial resources by way of government revenue and foreign exchange earnings along with expansion of public sector expenditure to hastily develop productive capacity of economy and improve living standards of people (1993). In early 1980s there was near total collapse of international oil market. The dips in international oil prices aggravated the problems of the Nigerian economy such as foreign exchange earnings declined and credit were dishonored (1993).

Inflation had its bitter toll on the Nigerian economy and monetary and fiscal policies among others have been deployed to arrest it. Central Bank of Nigeria has statutory responsibility of formulating and implementing monetary policy with emphasis on price stability. Inflationary trend has been cyclical since mid 1970s peaking at various times like during 1975, 1990, 1996 and 2006 as the major factor has been responsible for inflation in Nigeria is poor fiscal management by the government. However, inflation since 2006 has reduced to single digit of 8.4 percent on the average unlike the double digits experience since the 1980s. In addition, during the year 1970 broad money supply have stood at N 949.9 million and have risen to N23, 818.6 million during the year 1985. Then, at near end of 2006, money supply stood at N3 190.9 billion. There have been astronomic growth rate as there is no doubt of Nigeria presence of inflationary factors most ideally if output growth is not proportional to the economic status.

 

There are factors responsible for certain growth in the monetary aggregates is the monetization of foreign reserves, inadequate financial policy framework, and poor institutions among others. Aside, prior to the end of 2006 and early 2007, Nigeria have become one of highest indebted nations, owing huge sums of money to various international creditors. The exit from certain class of countries was secured in 2006 and sealed in 2007 after the debt cancellations and subsequent pay off of outstanding debts to the Paris Club among other creditors. The 2006 Nigerian Core Welfare Indication survey by the National Bureau of Statistics showed that the dependency ratio, defined as total number of household members aged 0 to 14 years and 65 years and above to the number of household members aged 15 to 64 years, was 0.8 as implied reflection of the high population growth rate of Nigeria.

However, during 2006 exchange rate has been stable with convergence of rates among the various segments of the foreign exchange markets as it assumes the official market and or Interbank Foreign Exchange Market, Bureau de Change and Parallel Markets in Nigeria. Presently, in the year 2008, the Nigeria’s naira exchanges for an average of N117/US as against N281.7/US in the parallel market in 1995 and implied that the naira has been appreciating over the United States dollar as other currency witnessed depreciation against the naira.  

 

 

 

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