Here’s how increase in prices affects the average Nigerian
When prices increase faster than income, the purchasing power of individuals becomes eroded. This has been the case of Nigeria for several decades. The Consumer Price Index (CPI), which is simply an accumulation of prices has shown an astronomical increase over the years. Between January 2009 and August 2019, the CPI increased by 228%, fueled by higher food prices, falling exchange rate and increase in the price of fuel among other factors.
On the other hand, growth in real income, measured by changes in real GDP has not caught up with this increase in average price level. The gap even got wider in 2016 when the economy plunged into a recession. Inflation rate reached 18% while real income declined by over 2%. Although Nigeria has experienced a decline in inflation rate in 2019, it will take a longer time for growth in real income to catch up with changes in prices. The implication is that the average Nigerian will struggle to make ends meet and improve living standards. For instance, the National General Household Survey recently released by the National Bureau of Statistics revealed that 44.3% of Nigerian households reported being unable to eat a healthy and nutritious/preferred food due to lack of money while the most common shocks to household were increase in food prices, increase in price of inputs, theft of crops, cash and flooding.
This means that as the gap between income and inflation widens, the average Nigerian will become poorer. To address this problem requires tackling the challenges associated with inflation such as power, infrastructure, logistics, multiple taxes, all of which increases the cost of doing business. From the income side, implementing temporary cash transfer programs for those at the bottom of the pyramid is necessary. In addition, it is important to note that one of the fastest ways to grow income is through jobs, sustainable jobs. Efforts to support and incentivize private sector investments in key sectors remains necessary in creating jobs for citizens. Lastly, massive skills development and training programs are required to ensure citizens are productive and can earn income through delivery of service.