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2023 Presidential Election Amidst Crippling Inflation Crisis and Devaluation of the Naira

2023 Presidential Election Amidst Crippling Inflation Crisis and Devaluation of the Naira


By Ikenna Igwe

For the most part in Nigerian politics, candidates have been known to play the identity politics game, where the focus is largely on ethnic affiliation, political parties and defacement of an opponent’s name and reputation. We hardly see election candidates debate on things in the line of a sustainable economic goal.


In July 2009, Boko Haram stared its insurgency against the Federal Republic of Nigeria and since then, the major national issue has been the case of Insecurity and rightly so, but with the dollar at 450 as at 30th May 2022, inflation eating up the value of the Naira, poverty becoming the reality of many Nigerians and essential commodities becoming even harder for the average Nigerian to get, big economic questions have been asked of the government and as the general election is approaching, the majority of the populace have tossed out party affiliation and ethnic difference. Financial experts have cited the need for diversification of the economy. As things stand currently, the GROSS DOMESTIC PRODUCT(GDP) is too low for a country of the size and population of Nigeria. Exchange rate of the dollar and other foreign currencies have made the economy more volatile and the country almost at risk of another recession.

And If there is anything Nigerians want to understand so badly, it is why and how exactly the same amount of money tends to be able to buy less and less than it used to be able to buy just few months ago. Prices of commodities keep rising without any corresponding rise in wages or income. The process and cause as to why a currency might lose its value and purchasing power is what majority of the populace don’t understand.

Economists and Financial analysts always focus on inflation as the major reason why a currency over time tends to lose its value and purchasing power. In this piece, we will understand the basics as regards to inflation, the causes, the control measures and its impact on the whole economy.



Inflation is the upward movement in the average price of general goods and commodities. A rise in inflation means an increase in the overall cost of living.

Inflation affects your ability to purchase goods and services, making them costlier over time. For example, a crate of egg sold for 900 naira in March rose in May to 1350 naira, that is essentially a 50% increase in the cost. Similar prices rose across various other commodities such as milk, bread, oil, petrol etc .This simply means that people tend to spend more to buy for less. Inflation largely occurs when an economy grows due to increased spending without any accompanying increase in the production of goods and service.


When this happens, prices rise and the currency within the economy loses its value and when it loses worth, its exchange rate weakens when compared to other currencies. However this depends on whether other countries are inflating less than yours; this is a key point because if they are inflating faster than your country, your currency will be strengthened against theirs.

According to STATISTA, in 2022, Nigeria’s inflation rate reached 16.1%. As at March 2022, the inflation rate in the urban area of Nigeria grew by 16.44% compared to the prior year, while the rural inflation rate experienced an increase of 15.49%.

Experts recorded Nigeria as one of the highest inflated economies in the world in 2020 and no wonder, for a country that relies heavily on importation, the impact of the Covid-19 pandemic affected the economy harshly because exporting countries were essentially on lockdown. As the economy was in recovery against the impact of the pandemic as at the end of 2021 and the beginning of 2022, the prices of petroleum products such as diesel increased sharply. Putting into account the Russia-Ukraine war, the stability of oil prices is a long way and experts around the world are alerting the public to prepare for more heavy hit on oil price.



Human beings tend to see everything around it in twos-either good or bad. In most cases, this is not actually the whole truth. Something can be good and only becomes bad when it is out of control. That is the case with inflation.

Sometimes, inflation is good for the economy. 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 and you know that consumer spending is what drives economic growth. In fact the federal reserve sets an inflation target, they expect a healthy core inflation rate of at least 2% every year. The Central Bank wants a little inflation which also leads consumers to believe prices will continue rising and this triggers spending.

For consumers, inflation means filling up gas cylinders, stocking up food stuffs and bucking up the cupboard with essentials.

For businesses, it means making CAPITAL INVESTMENT that under different circumstances might be put off until later. For some it means to buy Gold and other precious stones in order to hedge them from inflation.

Unfortunately, the urge to spend and invest in the face of inflation tends to boost inflation, in turn creating a potentially catastrophic feedback loop. As people and businesses spend more quickly in an effort to reduce the time they hold their depreciating currency, the economy finds itself awash in cash no one particularly wants. In other words, the supply of money outstrips the demand and the purchasing power of the currency falls at an even faster rate.

The frequency at which this is happening is what results in a case of HYPERINFLATION, which was seen in Zimbabwe [2000s], where consumers were known to be hauling around wheelbarrow loads of millions and billons of “ZIM DOLLAR” notes. That is the same with Venezuela [2010s], where thieves were practically refusing to even steal their local currency, the “BOLIVARES”, and this is essentially what brought about the destabilization of Germany in the 1920s where the inflation rate rose up to 29,525% in one month.

As the case of inflation is growing around the world and in Nigeria more so, it is paramount that the government and other regulatory bodies in the country put in place control measures on how to curb this trend.


It is the major responsibility of the government and different financial agencies to control and regulate inflation. There are two major ways governments regulate and curb inflation in its economy.

-Contractionary Monetary Policy: This has to be the most popular method used to control inflation. The goal of this policy is to reduce the MONEY SUPPLY within an economy by decreasing the price of government ‘TREASURY BONDS’ and increasing the ‘INTEREST RATES’. Decreasing the price placed on Treasury Bonds is meant to encourage citizens to buy government bonds which helps in reducing the money in circulation. Removing as much money from the public hands is the goal of this control measure. Increasing the interest gain on bonds is meant to encourage more investors to buy.

These are all ways employed to essentially reduce the liquid cash in the economy. Calling in debts that are owed to government are all geared towards collecting money from the public and give to government who tries to regulate the cash flow.

Policies that mandate banks and other financial agencies to increase its interest on loans are all engineered towards ensuring that people borrow less and spend less. As the news of increasing price of commodities have been all over the news, we have seen several countries hike their interest rates in order to curb inflation.

The Reserve Bank of India (RBI) raised their interest rate to as high as 4.4% for the first time in two years. With US inflation at a 40 year high, the US Federal Reserve raised its interest rate up by 1% and with the rate of inflation still soaring high, further hikes are expected. The Reserve Bank of Australia (RBA) announced on 4th May, 2022, that it had lifted its cash rate to 0.35%, a move designed to combat rising inflation, which is at a 21 year high.

According to a report from the BBC, The Bank of England warned that inflation in the UK would be over 10% by the end of the year, something not seen since 1982.

In Nigeria, the Central Bank of Nigeria, on 24th May, 2022, jacked up the bench market interest rate to 13% from 11%, the first change in almost a year and the first hike in six years.

CBN Governor, Godwin Emefiele, at the Monetary Policy Committee’s (MPC) 142nd meeting said that the action of increasing interest rates was geared towards taming the rising inflation rate in the country.

-Reserve Requirement: Another effective tool used is to increase the reserve requirement on the amount of money banks are legally required to keep on hand to cover withdrawals.

The more money banks are required to hold back, the less they have to lend consumers, which will decrease spending and by a huge margin reduce the direct impact of inflation. The CBN by regulation mandates bank to deposit up to 30% of their total capital as CASH RESERVE REQUIREMENT(CRR). Funds deposited are not accessed by the banks for loans and advances. It is noteworthy that Nigeria has the highest reserve requirement in Sub Saharan Africa. South Africa, Kenya and Ghana all have CRRs of below 10% . The CBN Governor, Godwin Emefiele, admitted that the high CRR was part of efforts to curb excess liquidity in the banking system and check inflationary pressure.


As the general election is fast approaching, the need for Nigerians to place issues regarding the sustainability of the economy at the forefront is so important, because we can’t get it wrong with another administration in power. Let’s do away with ethnic bias and party affiliation over everything else but rather look for competency and integrity.

The importance of exporting more and having a larger stack in another country’s economy cannot be overemphasized because that is the most effective way to strengthen the Naira against inflation or devaluation. This is a call for the country’s central bank to enact a functioning monetary policy that will curb this growing rate of inflation.


Contents provided and/or opinions expressed here do not reflect the opinions of The Pacesetter Frontier Magazine or any employee thereof.

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