Nigeria’s Consumer Price Index increased by more than 207% between 2009 and 2019 according to an analysis from Nairametrics research. Nairametrics took the difference between the Consumer Price Index in March 2019 and March 2009 and arrived at an inflation rate of 207.4%.
Consumer Price Index: This is a price index of a basket of goods and services tracked monthly by the National Bureau of Statistics. The difference between the CPI of one period and a corresponding month in another period is the inflation rate.
How the CPI Stacks for our leaders: From President Jonathan to Buhari, both have presided over double-digit inflation regimes with the latter performing worse.
- March 2011- March 2015 (Under President Jonathan): CPI change of 42.4%
- March 2015 – March 2019 (Under President Buhari): CPI change of 67%
- March 2011 – March 2019: CPI change of 137%
- March 2019 – March 2009: CPi Change of 207.4%
Food inflation is worse: CPI for Food Inflation turned out to be worse when measured outside of the All Items CPI. The CPI changes for Food between March 2019 and March 2009 was about 232%. Food CPI Changes December 2018 versus December 2009 CPI was 173%. This is also not surprising as Nigerians have paid more for the same food this year compared to 10 years ago. A bunch of plantains that cost N1000 today would have gone for N300 10 years ago.
More context: To put this into context the United States CPI change between March 2019 and March 2009 was just 20% (Nigeria within the same period was 207.4%). For example, the cost of an iPad or iPhone has remained about the same since they both debuted in 2007 and 2010 respectively signifying how prices can be stable with low single-digit inflation. In contrast prices of regular goods and services continue to increase in Nigeria.
Minimum Wage of little value: In fact, Nigeria’s minimum wage of N30,000 today was probably worth about N9,000 in March 2009. Nigeria’s last minimum wage of N18,000 signed into law in 2011. The equivalent of the latest N30,000 minimum wage was about N21,000 in March 2011. Thus the N18,000 minimum wage of 2011 is the equivalent of N25, 632 today.
- Nigeria’s Naira versus US dollar exchange rate is directly proportional to the price of crude oil. The higher the price of crude the stronger the naira. Unfortunately, crude oil is so volatile, price swings tend to occur cyclically.
- High dependence of foreign import for finished goods and services, raw material inputs, and technological transfers impact significantly on the local currency. The attendant transfer of inflation from foreign countries into Nigeria is a major factor.
- The high cost of doing business in Nigeria is also to be blamed for the high inflation rates. Transport and logistic costs, insecurity, multiple taxes, and corruption contribute significantly to the rising cost of goods and services.
How can this problem be solved?: According to Nairametrics Founder, Ugodre Obi-chukwu, the solution to this problem requires massive investment in Education and Infrastructural development. It doesn’t matter how the Government chooses to finance this. It could borrow more money as it always does, so long as the borrowed money is invested in education and infrastructure.
- Investing in education allows Nigeria to build the competency and capacity it needs to innovate and compete. This, in turn, will help reduce imports of things we can easily produce ourselves without counterproductive Government executive fiat.
- When a country has highly skilled citizens, then it can easily compete with other countries in the world whilst relying less on natural resources which we all know is a fad.
- Ramping up Infrastructure spending helps drastically reduces the cost of doing business in Nigeria. No bank will lend at single digit when they have to build their own roads, provide their own security, and chase after debtors.
- Therefore, investing in infrastructure allows the Government and the private sector to recoup over a longer term; allowing businesses to reduce cost.
The perfect solution: Once we get cost down, lending rates can drop to single digits. Economists in Nigeria have often alluded to the fact that Nigeria’s inflation problem is cost push rather than demand pull which is why CBN policies targeted at addressing it hardly works. Targetting inflation requires a concerted effort to reduce the cost of doing business which on the long term will usher in price stability.
