One of the ants eating our economy dearly recently is inflation. Over time, there have been numerous opinions and suggestions raised as to how to help put an end to this situation, but regardless of all this, it's very surprising to see that it keeps on growing rapidly.
There are plenty of factors attributed to being the reason we experience inflation in our economy today, and the level of imbalance caused does indeed affect most countries economic growth.
There has been a lot said about inflation and its effects on our economy recently, and even at that time, numerous individuals have spoken and written some interesting articles to talk more about the problem the community or society is facing when it comes to the high rate of inflation in our society today.
What's Inflation
By definition, inflation is regarded as a situation where too much money chases a few goods and services; in other words, inflation occurs when there is high demand for a commodity with little supply.
In countries like Nigeria today, we have seen how inflation alters society, especially when it comes to high rates of goods and services. Taking petroleum as an example, hoarding and not being willing to sell on most occasions has given room to others to increase the price of petroleum, selling at their desired price with no control from the government or any regulatory body.
There are numerous factors attributed to inflation today in our country, and all these factors indeed contribute to the high cost of living in our society today. It is unfortunate that citizens no longer have enough to maintain their day-to-day lives just because the price of commodities is inflated, making it hard for the average man to survive.
Factors responsible for inflation in our community
The primary cause of inflation today in our society is too much demand for a commodity, and in a situation where demand is greater than supply, the excess demand pushes up the price and gives room for inflation. Here in Nigeria, on most occasions, petroleum has indeed been one of the commodities that do get inflated, and this always affects other services and puts numerous businesses at risk, especially in a country where the power supply is not stable.
Lack of competitors
This is one attribute that does lead to inflation at times. Lack of competition in the market sector does give room for the price of goods to be inflated. Commodities that are supplied by a sole supplier do get inflated, but in a situation where there are competitors in the market sectors, it's always hard for anyone to inflate the price of anything.
Population Growth
An increase in population will also cause inflation because, as the population grows, it will increase the total demand in the market This also brings about excessive demand, and inflation might happen through that means.
Hoarding
This is one of the problems in our community today: some individuals hoard and stockpile commodities for various reasons, such as hoping that market value will go up or waiting for scarcity of that product for them to sell at their price.
Imposition of indirect tax
Taxes are one of the primary sources of revenue for the government, and all of this is generated by individuals and businesses out there. At times, the government imposes some indirect taxes on businesses, like excess duty, VAT, and the like.
All this indirect tax also has an effect on the manufacturer, and this also increases the price of their commodity while supplying it to the final consumer.
Increase in public spending
In any modern economy, government spending is vital, but in a situation where there is too much money in circulation, the rate of spending goes up, which on most occasions leads to inflation. Too much cash in the population always has a negative effect on the economy of any given country.
Devaluation
This is as a result of a reduction in the value of currency in a situation where there is a slight drop in the exchange rate for a particular currency. This will automatically make exports less expensive and more attractive to other countries. On the other hand, it makes other countries products more expensive too. Taking Naira to Dollar as an example, the value of Dollar to Naira in the stock market is high, and that indeed makes buying things from the US more difficult due to the level of devaluation in the Naira.
Government Policies
There are instances whereby government policies have also affected the economic growth of the country, resulting in inflation. Government policies and supply chains can lead to a curious economic condition called stagflation. This happens when the economy is stagnant and both unemployment and inflation are high. Though this situation is rare, it's also one of the causes of inflation in our community.
Putting an end to inflation in our community might be very hard, especially with the level of understanding that some individuals have, but of all things, it is significant that you, as an individual, contribute your quota to ensuring that we all have a community that is stable and worth living in for both the poor and the rich.
In controlling inflation as an individual, there are some little self-help tips that we can put into action and that will indeed save us. It cries on most occasions.
(1) Reduce discretionary spending.
(2) put off major purchases
(3) increase income with a new job, have a second job, or, better yet, have a stable source of income.
In a system where inflation is rampant, it is always hard for such an economy to grow, and it might keep on facing recession on most occasions. The rate of unemployment is also related to the level of inflation in society, with limited industry working.
It's essential that, irrespective of how individuals manage to control inflation on their own, it's important and vital that the government on its own comes into control of prices when it comes to goods and services, as well as increasing production of commodities to put an end to hoarding too.