In the recent inflation report by the National Bureau of Statistics, Nigeria’s inflation rate dropped further for the second consecutive month to stand at 17.93% in May 2021 from 18.12% recorded in April 2021.
The consumer price index, (CPI) which measures the inflation rate increased by 17.93% (year-on-year) in May 2021. This is 0.19% points lower than the rate recorded in April 2021 (18.12%).
Meanwhile, the closely followed food inflation index, which is felt first by the population, dropped from 22.72% recorded in April 2021 to 22.28% in May 2021, indicating the second consecutive decline in the food index.
The Lagos Chamber of Commerce and Industry (LCCI) revealed that Nigeria’s inflation is a result of CBN’s deficit financing, which has increased significantly, and which is highly inflationary due to its profound effect on money supply growth. Other supply-side issues remain security situation, cost of transportation and logistics, energy costs, exchange rate depreciation, and illiquidity in the forex market.
Inflation, which is a benchmark index on the sustained prices of goods and services recorded for a period, can also be good for the economy.
According to The Balance, inflation is good for the economy. When it’s mild, inflation has a healthy side effect. Once people start to expect inflation, they spend now rather than later because they know prices will be higher in the future.
Consumer spending drives economic growth. The U.S Federal Reserve sets an inflation target. “It wants a healthy core inflation rate of 2%, which takes out the effect of food and energy prices,” they said.
The Center for Law and Social policy (CLASP) says “People with higher incomes can offset rising inflation with rising incomes. Sadly, though, income inequality and rising inflation can entrap lower-income households into poverty.
In addition, research has shown that prices may rise more quickly for those who have lower-incomes, a phenomenon called inflation inequality.”