Inflation has become a common word in the mouth of everybody today, especially in my country Nigeria, simply because everyone has one way or the order been affected by it. Over the years, a lot has been said about this very same topic "Inflation" from tv shows to blogs and vlogs, etc but still, but it remains a trending topic due to its extinction not being in sight and its effect still playing a huge part in our economy today. That being said, let us get to know what it really means, and why we struggle with inflation.
What is Inflation
Inflation can simply be put as a drop or decline in purchasing power due to the high cost of goodsand services over a period of time, meaning, the price you got a particular or several commodities tend to increase in price with consecutive purchases, and the opposite term for inflation is deflation, which in like manners means the prices of goods and services slowly decreases over time, but we won't be focusing on that today.
Inflation has so much effect on a common man trying to get by each day with basic commodities such as food items, electricity,
Inflation doesn't just occur on its own, there are several factors that contribute to the inflation we face in the country which has so far tampered with the economy's growth. Majorly, when demand begin to exceed supply, Inflation is sure to take place.
Stay with me as I take you through several factors, to have a better understanding of why we face inflation.
Factors for inflation
1 Printing and Distributing more money to the citizens
It might sound funny at first that since there is money in circulation things are supposed to be cheaper but the reverse is the case, when there is a higher percentage of money in circulation, the demand for goods and services will be high, and likewise be limited, to control this, Inflation has to set in to curb citizens on a spending spree.
2 Devaluation of currency
A drop in the value of our currency compared to the more stable one that is dollar makes the prices of goods skyrocket, as most of our goods go through the international route also known as forex trade or exchange, for example, Naira, when we use a lot of naira due to it devalues to buy imported goods, we spend more therefore, the prices of such goods when resold will definitely be inflated.
3 Minimal or lack of competitors
When particular goods and services are limited to just a supplier or very minimal closed group in the market sector, there is bound to be inflation because he has no competitors that might likely want to reduce the price to win the heart of more customers to his side.
4 Hoarding for selfish reasons
Some entrepreneurs or suppliers due to personal selfish reasons hoard the goods needed by citizens to cause scarcity, and when there is a scarcity of the goods, the price will definitely increase because there is will high demand for the scarce commodity, this particular reason for inflation can be likened to how the government in Nigeria, how they sometimes hoard fuel when there is more than enough in the country, the most likely thing we hear amid scarcity is a price increase when inflation sets in, we have no other choice than to give in since the goods hoarded are one of the essential needs for us.
5 Government Policies
Some certain policies by the government can make life really difficult for its citizens, from paying huge taxes to other unnecessary huge levy placed on individuals and business owners and they are thereby forced to increase there prices of their goods in order to meet up, the consumers suffer at the end, which we refer to as inflation.
6 Overpopulation
When there is overpopulation in the country, likewise, there will be a higher demand for commodities in the market, and when the supply can't meet demand, inflation is bound to occur, so as to curb some percentage of the population from spending, by taking their purchasing power.
Do you know that inflation can have advantages even though it has disadvantages?
Advantages of inflation
Manufacturers can take advantage of inflation to make more profits
There will be an increase in the productivity of goods to meet the demands
There is a possibility for your assets to increase in price during inflation therefore you make more profits.
- Employment rate will increase due to more hands needed for more products to meet up the demand.
There will be a much better income gotten by the new employees,so as to meet up with the inflation, also investors have a higher chance of better returns on their investment during inflation.
if the inflation is not so high, it can boost the economic growth as citizens are made to spend more.
DISADVANTAGES OF INFLATION
- individuals with fixed income, such as salary earners, civil servants, etc, struggle to survive the hard-on their 4during the inflation as their income still remains the same before and during the inflation
- Plans already laid down by individuals or business owners gets disrupted due to price change and they have to re-strategize with a higher budget and raising capitals during inflation is a very tedious task.
*The cost of manufacturing commodities gets increase daily, the manufacturers have to other choice than to increase the prices if their goods, which is more felt by the consumers already faced with not enough income to meet up with the inflation, therefore, life becomes more difficult for the citizens of the country.
To round it all up, if inflation is in excess, it can significantly and negatively tamper with the growth of an economy because both individuals and business lose their purchasing power so how will the country survive as taxes to boost the economy are still gotten from these same sources. Inflation is best to be controlled by regulatory bodies so it doesn't go above range.