Stopping to buy two loaves of bread for the little girl sitting in the passenger seat next to me the other day, I handed over a 1,000 naira note and waited. When the vendor didn’t return with my change, I mumbled a little loudly, but the puzzled girl quickly jumped up, “Sir, the price is 1,000 naira for two loaves”; “there has been no change.” ‘Oh yeah? I asked, my face pale, puzzled. After regaining my composure but still a little bewildered, a public lecture given some time ago by the late Milton Friedman, the American guru of monetary economics, crossed my mind. He had proclaimed inflation a “disease”. How prescient, how fitting the reality on the ground in Nigeria, I thought. Given the widespread increase in virtually every item of consumption in this country, in which the poor and vulnerable (i.e. 90% of the population in fact) are wiped out, many have become ill fed and visibly emaciated from hunger and starvation on the streets, and in various neighborhoods, around us. Who can deny that inflation has indeed become the number one killer disease in Nigeria? Far from being hyperbolic or sensational, the choice of title for this article is indeed measured and appropriate. As a motorist, one sees the sporadic rise in fuel prices, the lines of gas pump attendants, the key to the agony on people’s faces, pushing and shoving each other to fill their little jerry cans for their small kiosks at their little corner stores.

The above is compounded by the perception that Nigeria is a major oil producer, at a time of rising crude prices. How did the Nigerian ruling elite conspire to keep the country in dire straits even as the price of crude is on the rise? You might think that the higher the dollar from the sale of Nigerian crude (one of the best in the world) the better it is for its economy and the suffering masses? No. Nigeria is not benefiting from higher crude prices any more than it has hitherto. This issue was discussed in a previous column, Nigeria’s Ambivalence Over Rising Oil Prices, PUNCH March 22, 2022. Timipre Sylva, the Minister of Petroleum Resources, had expressed his discomfiture over rising crude prices and rather pleaded for a reduction in prices! “We don’t want to see the price of crude hit the $100 mark…we would rather see it at $70 or $80,” he said. Because Nigeria does not have the capacity to produce enough crude to meet demand; “It was not easy to put the wells back into production,” lamented the minister. This is worth restating because it is doubly difficult for Nigeria to jump off the treadmill of inflation that it has designed itself for decades. And, it’s not just a nosy columnist slamming about it. The World Bank, in its latest study, Nigeria Development Update – The Continuing Urgency of Business Unusual, released on Tuesday, June 14, 2022, makes the case even more emphatic: “Inflation in Nigeria is one of the highest in the world” .

It is difficult to accuse the World Bank of being alarmist or sensationalist on this subject. The report continues: “Inflation in Nigeria, already one of the highest in the world before the war in Ukraine, is expected to rise further due to rising global fuel and food prices caused by the war. Consequently, Nigeria, for the first time since its return to democracy and alone among the major oil exporters, is unlikely to benefit fiscally from the windfall opportunity created by rising world oil prices. Again, this column reported this earlier in the year in Between Diplomacy and War: Russia-Ukraine High Tension (PUNCH February 8, 2022). Russian missiles and bombs had not even started flying over Ukraine at the time of writing. But, the broader ramifications of the impending war on Africa highlighted in the article were accurate: “A major disruption of international trade, triggered by open conflict, would have a disproportionate impact on struggling African economies and plagued by inflation. . So while a million African soldiers may not die in battle this time around, even millions more could die of starvation and starvation on our shores for an extended period of time. Was anyone listening?

Economists love to compartmentalize inflation into categories: “core inflation”, “headline inflation”, “hidden inflation”, “real inflation”, “runaway inflation”, “stagflation” (my favorite) and a few others. These make no sense to the common man on the street, who is focused on the most basic and simple thing: food on the table for the family. When they say inflation in Nigeria is approaching the 20% mark, it means nothing to the okada runner for whom bread means so much to the working day. A loaf of bread he bought for N250 a few months ago, is now selling for N500 today. That’s a 100% increase. 100 and not 20%. 100 for him. Hence, the World Bank’s warning of inflation in Nigeria rising to 17% by the end of 2022 has no resonance in the life of man. He can only see 100%. Inflation was once a global event, particularly in the post-World War II period due to the fixed exchange rate agreed under the “Bretton-Woods” system, which saw much of the world’s currencies pegged to the US dollar. This comfortable arrangement came to an abrupt end in 1971. Since then, inflation has become a national event (because of floating exchange rates), albeit with international consequences. In other words, it has become a contagious disease.

Nigeria, however, does not have a floating exchange rate. The value of the naira is pegged to that of the US dollar but also leaves the economy vulnerable to external shocks. Inflation is seen as an enemy to be defeated in Western economies, and the key tool for this is the monetary targets set by governments for their central banks to meet. In difficult times, Western economies tend to have very low interest rates, not exceeding 3% at most, to encourage investment and support growth. To curb inflation, the rate is adjusted on a small incremental basis of, say, 1.5 to 1.75 percent as currently in the United States. Nigeria’s interest rate is already hovering above 30% for small and medium industries. With little or no leeway from the Central Bank of Nigeria, the World Bank is pushing for the elimination of gasoline subsidies, more concessions to private investors, an end to deficit financing, and more. In other words, put even more pressure on the poor.

It is often said that only a handful of people pay income tax in Nigeria. It is indeed laughable. According to the Joint Tax Board of Nigeria, only 10 million people are believed to have registered for personal income tax purposes in all states of the federation, including the Federal Capital Territory. This is not, strictly speaking, true. Nigeria’s permanent and chronic inflation is a direct tax on the remaining 190 million poor and vulnerable people, which they pay willy-nilly with no registration required. Despite strong economic numbers in the United States, inflation (at a 40-year high) has become a hot political issue for the Biden administration and the Democrats who are expected to lose control of Congress in the upcoming midterm elections. in November. Why isn’t inflation also a hot campaign issue in an election year in Nigeria? Only the brouhaha on the “North-South”, “Muslim-Muslim” ticket. The reason for this is that inflation is seen as a political problem for elected officials in the United States and other western democracies, whereas here it is seen as an economic problem for the Governor of the Central Bank of Nigeria only . It’s not. But that’s what the political leaders want you to believe; this protects them from electoral liability.