![Why Inflation Remains High in Nigeria Why Inflation Remains High in Nigeria](https://tkcdn.tekedia.com/wp-content/uploads/2021/12/19102058/inflation-768x432.jpg)
Lucky China as they fight to keep growth going: “In a series of unexpected moves, China has implemented consecutive interest rate cuts, signaling a strategic response to the current economic pressures facing the nation. …The People’s Bank of China (PBoC) has reduced key rates, including a significant cut in the one-year medium-term lending facility rate, from 2.5% to 2.3%, injecting a substantial 200 billion yuan into the market.”
The recent rate cuts also follow a major Communist Party meeting that disappointed investor looking for short-term stimulus measures. Instead, the meeting emphasized President Xi Jinping’s plan to prioritize technology in China’s economic future while accepting slower growth in the near term. This shift in focus suggests a longer-term strategy aimed at restructuring the economy’s growth drivers away from sectors like property, which have traditionally been fueled by debt.
During the pandemic, the United States also cut rates, to cushion growth. Japan has been on sustained low interest rates for ages now. Even the European Union does the same thing. And the US will soon begin cutting rates.
But when it comes to Nigeria, we are always reminded that we must keep raising rates to fight inflation. In my thesis, I posit that we have this stubborn regime of inflation because our SUPPLY is low, and if we can fix the supply, inflation will reduce. But with sustained increases in rates, we will reduce SUPPLY which will then trigger more inflation, since Demand is unaffected in a country will insignificant consumer credit, ceteris paribus. Of course, I wish Nigeria good luck.
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Nigeria’s inflation has defied all efforts by the government, rising once again in June to a record 34.19%, according to the latest report from the Nigerian Bureau of Statistics (NBS).
The headline inflation was up from 33.95% in May 2024, marking an increase of 0.24 percentage points within a month and a substantial year-on-year jump of 11.40 percentage points from the 22.79% recorded in June 2023.
The report highlighted that on a month-on-month basis, the headline inflation rate in June 2024 was 2.31%, a 0.17 percentage point rise from the 2.14% recorded in May 2024.
Nigeria’s Illusion of Using Interest Rates to Control Inflation
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