INFLATION IN NIGERIA: CAUSES, CONSEQUENCES AND CONTROL

CHAPTER ONE
1.0            INTRODUCTION
1.1     BACKGROUND OF THE STUDY
Inflation is neither new in the economy of Nigeria nor the work at large.Variations in magnitude or rates have been observed to be in existence.  In Nigeria, the rate of inflation was about 10% between 1969 and 1970. prices rose by about 14% (fourteen percent) (i.e. immediately after the civil war), then fell to 30% in 1872, and rose again by about 16% in 1974 and reached a rate of about 34% increase in 1975  inflation was the greatest task to government’s policy makers in the 1970’s history. In the work, between 1799 – 1801, prices rose by more than 50%.  Also between 1937 – 1941 (i.e. during second world war), the price level was recorded to be almost double what it was before.Then between May 1542 and mid 1551, the world recorded an inflationary rate of 16% per annum, 23% during war with France and almost 30% during the first war in 1914 – 1918.  Thus is about the highest rate attained in the world history.  It is now clear that inflation persist both in the developed and developing countries, with difference in magnitude or rated.  The rates in developing countries making companion with present situation, as the above noted rates were attained during the eighteen century and the early part of nineteenth century (1799 – 1807), and the early mid parts of the twentieth century (1939 – 1951).In the case of Nigeria, the highest rate were attained in the late twentieth century (1969 – 1975).  We all  know that inflation simply refers to a continuous or latent rise in price. According to web stars seventh new collegiate dictionary, inflation is defined as an “increase in the volume of money and credit relative to available goods resulting in a substantial and continuity rise in the general price level.  This definition pull out the fact that inflation cannot occur unless there is under increase in the volume of money and credit which brings about continued rise in  general  price level of goods and services, which is not being matched by the proportionate quantity of goods and services in the economy.
Inflation became rampant in Nigeria after the Nigerian civil war, though it might have been in existence bough before then.    Immediately after the Nigeria civil war, prices took an upward turn from their previous levels.  This was due mainly on the shortage of goods and services caused by the disruption of productive factors by the civil war. Further, another important caused factor is the review of salaries and wages.  This reviews stated with Adebo Award of 1970, which was followed by the Udoji and Williams awards o 1974, and also 45% increase in salaries implemented by Gen. Babangida in 1991 and also the most recent one that is the new minimum wage by Gen. A. Abubakar and president Obasenjo in 1999 and 2000 respectively.  All these revises intensities the inflationary pressure. Also, the high prices of imported goods arising from increase in foreign price and instability of international exchange rate. Surcharge from port congestion, strange facilities, marketing arrangement plus the distribution net work, the impact of second tier foreign exchange market and the removal of oil subsidy are all inflationary factors in the Nigeria economy.

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