By Ogbemi Favour Osayekemwen
The government should organize welfare programs for individuals and provide loans, food assistance, and adequate resources. This will help low-income earners. The government should also provide more employment opportunities, increase salaries and ensure a better standard of living for citizens.
Why has the affordability of essential goods and services declined so rapidly in Nigeria? One major reason is inflation. It is generally defined as a sustained increase in the general price level of goods and services in an economy over a period of time. In other words, inflation is an economic condition that affects both individuals and businesses. This implies that inflation reflects a reduction in the purchasing power per unit of money.
The phenomenon of inflation in Nigeria has been closely linked to economic policies, external shocks, and domestic factors such as fluctuations in crude oil prices, which play a significant role in the Nigeria economy. In recent years, Nigeria has experienced rising inflation rates, significantly impacting poverty levels and standard of living among individuals.
The relationship between inflation and poverty is complex. When inflation rises, purchasing power diminishes, making it difficult for income households to afford basic needs. This article examines the causes of inflation in Nigeria, its effects on the standard of living, and possible solutions to the problem.
Several factors contribute to the rise of inflation in Nigeria. One major factor is removal of fuel subsidy. A subsidy is generally a policy that artificially lowers the cost of goods and services for consumers or raises the prices for producers above the market levels. In May 2023, Bola Ahmed Tinubu, the current president of Nigeria, removed the fuel subsidy and this affected the lives of many individuals. One effect was the increase in transportation cost. The fares for buses, taxis and transportation of goods rose sharply because the fuel subsidy was removed.
Closely related is the high price of goods: Beacause of the increased cost of transporting foods and other goods to different parts of the country, the prices of these items escalated drastically.
This made food very expensive, and the average working-class individual now struggles to purchase and eat adequately every day.
Production cost increased. Many businesses rely on fuel to power their generators and the increase in fuel price. As a result of this, they had to increase the prices of their product to cover this cost.
Food supply disruption is another major factor. Farmers in some states face banditry and kidnapping in the Northwest and north-central regions of Nigeria. They are often chased from their farmlands or kidnapped for ransom, forcing them to abandon their means of livelihood. In some cases, the crops and food products may spoil or be damage and they won’t be able to get to the intended consumers.
Poor infrastructure compounds the problem: Infrastructure refers to the physical systems that support economies, such as transportation, utilities, energy grids and social infrastructure. These assets often essential services with predictable demand, giving them potential to withstand economic pressure. Many infrastructure investments are underpinned by inflation-linked revenue models, such as regulated tariffs or long-term concession arguments. As a result, they’re naturally aligned with rising price level.
Nigeria’s heavy reliance on imported goods combined with depreciation of naira is another factor. Nigeria cannot produce enough goods to meet local requirements. Therefore, it imports its products from other countries.
The major problem is that these imported goods are paid in dollars rather than naira. Whenever naira loses value against dollars, importers tend to spend money to purchase the same quantity of good. When it gets to the Nigerian market the price increases. This means that the weaker naira makes imported goods such as raw materials, machinery, fuel, food very expensive. When the naira depreciates, the cost of importing goods increases which can lead to inflation. Many local manufacturers import raw materials needed for production. As their production cost increases, they tend to make their product expensive. This is one of the reasons inflation continues to climb in Nigeria.
Government economic policy is another factor. Fiscal decisions made by governments can exacerbate inflationary pressures. When governments increase spending without a corresponding increase revenue, they often resort to borrowing or creating new money, both in which can fuel inflation further.
Taken together these forces have driven inflation levels that go well beyond rising prices on receipt —they have reshaped daily life across Nigeria. One of the significant effects is increase in poverty. Without corresponding increase in income, high inflation forces people slightly above line into poverty especially food poverty. Which in turn affects social cohesion and an individual wellbeing. In Nigeria, where a significant proportion of the population relies on subsistence agriculture and unemployment, fluctuations in prices, increases in cost of living reduce purchasing power. This can push families into a cycle of poverty. The rising cost of food and essential goods have forced many households to cut back on expenditures, thereby impacting education, health and overall quality of life. The rate of poverty in Nigeria has increased to the extent that many beggars can now be seen on the streets.
An increase in the crime rate is another major factor. High inflation through a reduction in purchasing power is likely to contribute to high youth crime rates, which further aggravate the insecurity conditions in the country. These crime include robbery, theft, house breaking, grievous harm, assault e.t.c this may be caused by the economic hardship, that pushes many individuals into criminal activities. Notwithstanding, the consistent rise in the price of goods and services has contributed largely to the increase in crime due to the high cost of living. Some youths tend to be involved in this just for survival.
The decline of healthcare is also another factor of inflation. It has affected individuals so badly that low-income earners no longer visit properly functioning hospitals because they cannot afford the cost. This may lead to loss of life.
Lower educational attainment follows a similar pattern. Inflation has affected the education sector to the extent that an average Nigerian citizen struggles to buy textbooks, pay tuition fees and afford transportation because they all have become so expensive. As a result parents tend to send their children to poorly equipped schools.
Given these ranging effects addressing inflation cannot wait. The government should provide farmers with loans, subsidies and adequate infrastructure. This could ease shortage of goods, and increase production and help lower the price of commodities.
Empowering local industries by supporting them and reducing reliance on imported goods and lessening the exchange rate fluctuations. In addition, policies that strengthen the naira can help reduce the cost of imported goods. The government should also improve roads, electricity and transportation systems to reduce production and distribution costs.
The government should organize welfare programs for individuals and provide loans, food assistance, and adequate resources. This will help low-income earners. The government should also provide more employment opportunities, increase salaries and ensure a better standard of living for citizens.
Finally, optimizing the level of security in Nigeria, especially in farming communities will boost agricultural production and help reduce food inflation.
In summary, inflation remains a major economic challenge affecting the standard of living in Nigeria. It has made it challenging for many individuals to afford daily needs such as food, transport, healthcare and proper education. It has also contributed to declining wages and increased insecurity.
Consequently, measures should be taken to improve the wellbeing of citizens. Efficient on economic and monetary policies, escalated local production, and advanced security are indispensable to control inflation in Nigeria.
Ogbemi Favour Osayekemwen is a Public Affairs Analyst
