combating the effects of inflation on people and businesses

The economic situation in Nigeria is perplexing, with inflation worsening the cost of living and eroding citizens’ purchasing power. High inflation is hostile to the economy, causing businesses and households to perform poorly and pay more for goods and services.

The consequences of inflation include job losses, increased malnutrition, social status decline, food insecurity, and high levels of begging. Small business owners in Nigeria are struggling daily due to low sales, accelerating inflation, and worsening living conditions.

The high cost of living and inflation are causing concerns for both financial and mental health. The National Bureau of Statistics’ data showed Inflation in Nigeria reached 22.41% in May 2023, the highest in the last 17 years. This is the highest level in two decades, with over 100% increase in food prices and transportation costs.

Inflation in Ghana reached 42.50% in July 2023, with food and transportation costs rising significantly. Inflation in Sierra Leone reached 44.81% in June 2023, driven by food and fuel inflation and the depreciation of the Leone currency. Inflation has reached a 36-year high in Congo, and many African countries are facing growing pressure from high inflation and unbearable cost of living.

Inflation in most African countries is primarily driven by the Ukraine war and rising food, fuel, and energy costs. Nigeria’s inflation is mainly caused by forex unification, government policies, public debt, and fuel costs. Increased prices can decrease purchasing power, potentially eroding African currencies’ value against the dollar and causing price instability.

To achieve price stability and maintain growth, the Nigerian government should adopt structural policy reforms and tight monetary and fiscal policies. The N500bn palliative for poor households is commendable, but it is important to support structured small-scale businesses, which contribute to economic growth, job creation, and social cohesion.

Studies show that SMEs contribute over 60% of GDP and 70% of employment in low-income countries, and 95% in middle-income countries. To stimulate the Nigerian economy, a substantial part of the N500bn palliative could be used to provide zero-interest loans to structured, traceable, and collateralized SMEs with repayment within five years.

The SME sector can contribute to economic growth by reducing poverty and creating jobs. However, it requires government support, a labor-intensive sector, and political leaders to minimize public spending, strengthen the judicial system, combat corruption, address infrastructure, and build effective institutions. This will help reduce unemployment rates and promote economic growth.

Institutions and individuals can beat inflation by preserving capital and strengthening purchasing power through income addition. Acquiring investments, like real estate, helps keep up with inflation, as N100,000 today may not acquire the same value in 10 years.

Consider investing in other currencies, diversifying your portfolio internationally, and acquiring inflation-protected securities like equities, Gold Shares ETF, or mutual funds for higher growth. Start a business, generate passive income, and reduce unnecessary expenses to increase saving propensity.

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