*The global financial institution projects the relatively high inflation in the country ultimately, hampers Nigeria鈥檚 attempt to achieve economic recovery and erodes the purchasing power of consumers and most vulnerable households

Alexander Davis | 绿帽献妻

The World Bank has stated that Nigeria is projected to have one of the highest inflation rates globally, and the seventh highest among Sub-Saharan African countries in 2022.

绿帽献妻 reports the global financial institution said the increasing prices of products and services diminish the welfare of Nigerian households.

The Washington, United States-based institution disclosed this development in the November 2021 edition of its Nigeria Development Update released recently.

The World Bank said: 鈥淚n 2022, Nigeria is expected to have one of the highest inflation rates in the world and the seventh highest in Sub-Saharan Africa.鈥�

It also stated that the comparatively high inflation hampers the country鈥檚 attempt to achieve economic recovery, and erodes the purchasing power of consumers and most vulnerable households.

The report further noted: 鈥淗igh inflation is frustrating Nigeria鈥檚 economic recovery and eroding the purchasing power of the most vulnerable households.

鈥淚n the absence of measures to contain inflation, rising prices will continue to diminish the welfare of Nigerian households.鈥�

The global financial body also highlighted the adverse effects of inflation on the West African country, which include pushing eight million Nigerian consumers into poverty.

Besides, the Bank said that high inflationary rate has the possible disruption of consumption, investments and saving decisions, among other consequences for the citizenry.

The report also said: 鈥淚f inflation had been closer to the CBN鈥檚 goal of nine percent in 2021, the average Nigeria鈥檚 consumption would have been 15 percent higher, and eight million Nigerians would have not fallen into poverty.

鈥淚f double-digit inflation persists during 2022-2023, rising prices will distort consumption, investment, and saving decisions of the government, households, and firms, with adverse ramifications for long-term borrowing and lending.鈥�

The World Bank stated: 鈥淥ver time, the disproportionate impact of inflation on lower-income households and those working in sectors with low savings (e.g., agriculture) will exacerbate inequality.

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鈥淯ltimately, inflation will not only negatively affect incomes, but also economic productivity and job creation, further constraining the recovery.鈥�

The Bank further said that over two years, an increase in food prices accounted for about 70 percent of the annual increase in the rate of inflation in Nigeria.

Inflationary pressures were triggered by multiple demand and supply shocks, it said.

The document further stated: 鈥淚nflationary pressures are being generated by multiple demand and supply shocks.

“Supply shocks arising from disruption of supply chains linked to COVID-19 and associated containment measures have eased, but security issues, border closures, and limited access to markets continue to fuel inflation.

鈥淭he current mix of monetary, fiscal, foreign exchange, and trade policies also plays a prominent role as a driver of inflation.鈥�

According to World Bank, 鈥渢rade and FX restrictions, including the closure of land borders starting in August 2019, have increased prices for food and consumer goods, and imports of over 40 goods, including many staple foods, are currently ineligible for FX through formal windows.

鈥淣igeria鈥檚 exchange-rate management has resulted in the rise of parallel rates, which are closely linked to food-price dynamics. Unable to access FX through the official exchange-rate window, businesses seek FX on the parallel market and other alternative sources.鈥�

The Bank鈥檚 report on Nigeria said: 鈥淭he parallel rate influences their business decisions, and fluctuations in the parallel rate pass through to market prices for goods and services. 鈥淢oreover, monetary policy has not prioritised controlling inflation, and the monetary financing of fiscal deficit undermines the effectiveness of policies to contain demand-side inflationary pressures.鈥�

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