One
of the causes of inflation in Nigeria has been the various government polices
to stimulate a past rate of economic growth and development since independence.
In recent years, however, specific policies like structural adjustment
programme (SAP), external debt policies, second tier foreign exchange market
policies, policies on subsidized on petroleum products and fertilizers policies
of privatization and commercialization, policies on trade, liberalization and
interest rate deregulation and other are responsible for the inflationary trend
in our economy.
Before SAP, inflation in Nigeria was by primary rising the
world export price and falling output. These are the major external factor
contributing to Nigeria’s inflation. Thereafter, domestic or internal causes
like increase government expenditures, raising domestic credit creation and
supply, bottlenecks such as shortage of raw materials and spare parts worsened
the situation. There is need therefore for
monetary policy reform exchange rate reform, effective inflation in
Nigeria.
According to Okowa 91996), inflation is a problem that
afflicts all economics. But that, it is typically more severe in the less
developed countries.
Many conditions have made inflation possible in
Nigeria, thus, several factors are identified as being responsible for
inflation and its rising rate in Nigeria. Okowa (1995) (1996) attributes
inflation to structural rigidities and supply inelasticity. He also mentions
fiscal and monetary responsibility as what increases inflation. Given that
inflation could occur as a result of the actions of consumers, producers or
workers. Akpakpan (1994) argues that the root causes of the problem are found
beyond the actions of the mentioned economic agents. He posits the necessity of
examine the factors that determine, induce or permit such actions. Akpakpan
attributes inflation to two related factors that are responsible for the
actions of economic agents,
1.
The way Nigeria
organizes and conducts the production and exchange of goods and services in the
country.
2.
The policies
Nigeria uses to sustain her chosen system of production.
The factors condition each other. Beyond creating
conditions for selfish manipulations, a system of production that is
characterized by private ownership and market direction of activities induced
government policies and policy measures or instruments which intensify the
problem of inflation in the society.
Akpakpan goes ahead to state that fixed policy has
been abused in Nigeria and that the problem in a consequence of this as well as
the fact that the economy is managed by dishonesty people.
Gbosi (1993) argues that the phenomenon of inflation
in Nigeria is caused by the following:-
1.
Rapid structural
changes in the economy in recent years, the oil that increases money supply.
2.
Rapid urbanization
which intensifies the demand for goods and services that are in relatively
short.
3.
Expansionary
monetary policy adopted by the central bank of Nigeria.
4.
government
policy,
From an industrial point of view, Okowa (1995)
attributes inflations to:
1.
Corruption
mediated a decrease in effective labour inputs.
2.
indiscipline
which gives rise to a reduction of effective labour input, this would yield a
decline in supply.
3.
Corruptions which
mediate a decrease in capital stock, which will bring about the problem.
On the issue of cost push inflation, Maro (1996)
distinguishes many types:-
·
Wage-push
inflation
·
Profit –push
inflation
·
Import price push
inflation
·
Tax- push
inflation
·
The exhaustion of
natural resources
Consequently, civil war ravage Nigeria for thirty (30)
months between July 196 and January 1970, inflation showed itself then, but it
was glaring and serious by the middle of 1969 to May 1970. In some cases prices
of locally made goods rose to about 200%. The price of a tin of peak milk rose
from 6k early in 1966 to 16k in some places in March 1970. Money was not worth
much because only few goods were available to be purchased with money.
This phenomenon was caused by the federal government
determination to finance the war with is own resources. Consequently, banks
gave more credit facilities to public agencies, which engaged in the
unproductive activities of the war.
The government without the corresponding production of
goods and services spent more money. Another case or rather what aggravated the
situation was due to the ineffective fiscal measure aimed at withdrawing of
money in circulation via the 5% national recommendation and development saving
scheme launch in January 1968 and partly tot eh activities of the smugglers.
To extend it further, the government appoints a price
control board on rational level with it’s branches in all the states of the
federation to peg the prices of the certain essential consumer goods like milk
and drinks on the one hand and building materials on the other hand. For example,
a bag of cement, was sold N1.35 in
March 1969 was sold for N2.70 in March
1970. We shall now examine the general effects of price control and it’s
effectives or not. We shall use cement again, which has always been
controversial. Before July 20, 1970 a bay of cement was sold for N1.50 at Ibadan. On that was the ceiling
price. The board said” each price represents a ceiling which trades must not
exceed if any trader wants to increase his share of the market and offer a
lower price than the recommended fixed price, he is free to sell at that
reduced price.