BUSINESS DAY EDITORIAL
Inflation is often described as the cruellest tax, which reduces buying power and puts millions of people in impoverished circumstances. For Nigeria, where inflation has soared to a 28-year high of 34.6 percent, this silent tax has become a beast. The federal government wants to bring down inflation to 15 percent by 2025. This may seem like a big goal—a rallying cry for hope in an already troubled economy—but if they don’t fix the problems that cause inflation, it could end up being just another broken promise.
The challenges are monumental. Spiralling food prices, a volatile naira, and excess liquidity have entrenched inflationary pressures, leaving businesses and consumers gasping for relief. The Central Bank of Nigeria (CBN) has responded with aggressive monetary tightening, pushing interest rates from 18.75 percent in 2023 to 27.5 percent this year. While Governor Olayemi Cardoso asserts that inflation will begin easing by 2025, history warns us against undue optimism. Nigeria’s economy will always have problems with inflation as long as there isn’t a clear plan that goes beyond raising interest rates.
“Nigeria’s economy will always have problems with inflation as long as there isn’t a clear plan that goes beyond raising interest rates.”
Nigeria’s predicament is not without precedent. Turkey, faced with hyperinflation peaking at 86 percent in 2022, managed to halve it by 2024 through a combination of bold fiscal restraint, monetary tightening, and structural reforms. By cutting public spending, increasing interest rates to 50 percent, and enhancing productivity, Turkey clawed back economic stability despite geopolitical tensions and currency crises.
Similarly, Argentina offers a sobering lesson. Inflation there breached 200 percent in 2023, forcing President Javier Milei to adopt a stringent fiscal policy, including slashing public expenditure, reducing debt, and curbing money supply growth. While the path was painful, it demonstrated that controlling inflation requires hard-nosed decisions and a willingness to confront entrenched inefficiencies.
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