What we must do now to help make life better for the people in Nigeria who are suffering?
By Abayomi Odunowo.
The current approach that the handlers of the Nigerian economy are employing to address the issue of inflation is the use of policy rate adjustments. However, it is our opinion that this solution is not effectively addressing the root of the problem and is instead complicating the situation.
Firstly, it is important to consider the diagnosis of the issue at hand. The handlers of the Nigerian economy seem to be operating under the wrong assumption that inflation can be controlled through policy rate increases. While this approach may have some impact on the economy, it is not addressing the underlying causes of inflation and is instead leading to unintended consequences.
One of the unintended consequences of the reliance on policy rate increases is the increase in deposit and lending rates. This can have a negative impact on businesses and consumers, as higher lending rates make it more expensive to borrow money for investment or consumption. Additionally, higher deposit rates may discourage spending and investment as individuals choose to save rather than spend their money.
Another issue with the current approach is that it is not leading to the desired reduction in the inflation rate. Despite the policy rate increases, inflation continues to persist, indicating that this approach is not effectively tackling the root causes of inflation.
It is clear that the current approach to addressing inflation in Nigeria is not working as intended. In order to effectively address the issue of inflation, it is necessary to take a different approach that focuses on tackling the root causes of inflation rather than simply relying on policy rate adjustments.
One potential alternative approach is to focus on addressing the supply side factors that are driving inflation. This could include measures to increase food production, reduce transportation costs, and improve infrastructure to reduce bottlenecks and inefficiencies in the supply chain. By addressing these supply side factors, it is possible to reduce the upward pressure on prices and ultimately reduce the inflation rate.
In addition to addressing supply side factors, it is also important to consider the impact of currency devaluation on inflation. Currency devaluation can lead to higher import prices, which in turn can lead to higher overall inflation. It is important for the handlers of the Nigerian economy to consider the impact of currency devaluation on inflation and take appropriate measures to mitigate its impact.
Furthermore, it is important to consider the role of fiscal policy in addressing inflation. Fiscal policy measures, such as targeted subsidies and support for key industries, can help to alleviate inflationary pressures and support economic growth. By taking a comprehensive approach that considers both monetary and fiscal policy measures, it is possible to develop a more effective strategy for addressing inflation in Nigeria.
In conclusion, the current approach that the handlers of the Nigerian economy are employing to address inflation is not effectively tackling the root causes of inflation and is instead leading to unintended consequences. In order to effectively address inflation, it is necessary to take a different approach that focuses on addressing supply side factors, mitigating the impact of currency devaluation, and considering the role of fiscal policy. By taking a more comprehensive approach, it is possible to develop a more effective strategy for addressing inflation in Nigeria.
Media Contacts
Otunba Abdulfalil Abayomi Odunowo
National Chairman AATSG
URL: www.aatsg.org.ng
Tel: +2349053535322
Email: [email protected]
