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 controversia
l. 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.
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