A major macroeconomic problem that affects countries of all nation regardless of how big and how developed they are remains inflation. The only difference is that for the developed nations, the inflation rate is much lesser in figures when compared to the third world countries. This inflation rate is easy to control and maintain in developed nations due to policies and mechanisms in place to curb this issue. In third world countries, though, this is the opposite case as most governments are clueless on how to curb these issues while enacting policies that do not work to improve things.
I am quite unfortunate to be born and bred in this nation where the government is incompetent, and the people giving them advice or other appointed ministers also lack the technical know-how to remedy this inflation issue. My country's name is Nigeria, and although inflation is an issue, we thank God as another country has it worse. Countries such as Venezuela and Zimbabwe are suffering from inflation figures over the roof. Inflation in Nigeria is around 40%, as published in a report published last year. Inflation is at an all-time high everywhere, and every country continues to bear the brunt. However, some countries are suffering from it more than others.
Speaking about inflation in Nigeria, it is hitting the economy hard, and many necessities are not becoming luxury items to have. Things like food items needed to keep the body going are now hard to see and when you come across them, they are always around time for their initial value, a less quality product. The governor of the Central Bank of Nigeria keeps publishing different monetary and fiscal policies to weaken the impact of inflation, but none seems to be working. The reason why the policies are not working is the fact that the root cause of the inflation issue in Nigeria is not being worked on.
So what is the root cause of inflation in Nigeria? The answer is that Nigeria is a consuming country, i.e. we are more focused on importation rather than being a producing state. So when this scenario plays out, it forces the currency's value against the dollar to reduce as no country requests our Naira note. As Nigerians import goods from abroad, they need to use the dollar more. This creates dollar scarcity as the dollar in circulation might not be enough, forcing buyers to pay more than the approved amount for dollars. As the dollar value increases, so is the amount of the goods imported, which leads to a high cost of living in the country as almost everything is imported.
The high cost of living has adversely affected me as I am a salary earner with a fixed salary in my bank account. Regardless of how hard I work, my pay check remains the same. i.e. constant. And with the prices of necessities needed to survive, I have had access to lesser of them as the prices for them are above my pay grade. I used to buy a quarter bag of rice monthly before now, but now, I buy lesser as rice is now expensive. Food items such as indomie, spaghetti, beans and even locally produced foods like yams, potatoes and fruits are expensive. Not just consumables, the prices of transportation fare is high, prices for subscriptions on DSTV are high, payment for services rendered has tripped, and even the house rents have been increased. I will not even lie, I am not coping that well, but we continue to push and hope for better days ahead.
The tips I can share with people to hedge against inflation are:
- Only spend when it is necessary
- Always cook and eat homemade meals, avoiding eating outside.
- Only go out when it is necessary.
- Try to have a side hustle
- Try to earn in dollars. This way, inflation will be optimally hedged.
- do not spend lavishly
- live below your means