Inflation is a big word that can be confusing to many people, but it is important to understand what it means. In simple terms, inflation happens when the prices of things we buy go up and up, making it more expensive to buy the same things over time. For example, if you could buy a candy bar for 50 naira last year and this year it costs 100 naira, that is inflation.
In Nigeria, we have been experiencing inflation for a while now, and it has become a concern for everyone. When inflation occurs, the value of our money decreases, and we can buy fewer things with the same amount of money. Let’s say you had 100 naira in your piggy bank last year, and you wanted to buy a toy that cost 50 naira. You could have bought two toys because the toy cost was 50 naira each. But this year, that same toy may cost 75 naira because of inflation. Now with your 100 naira, you can only buy one toy.
Inflation happens for various reasons, but one of the main reasons is when there is too much money in circulation in the economy. When there is more money than goods and services available for sale, the prices go up, and inflation happens. Also, things like natural disasters, war, and pandemics, like the COVID-19 pandemic, can cause inflation too.
In Nigeria, the COVID-19 pandemic has had a big impact on our economy and has caused inflation to soar. Many businesses had to close, and people lost their jobs, which led to a decrease in goods and services available for sale. This meant that the demand for goods and services became more than what was available, and, as a result, prices increased. Additionally, the expenses that businesses incurred, such as transportation, utilities, and other overheads, also increased, which led to the increase in prices.
What can we do to reduce inflation? The government can do a few things to prevent inflation, like controlling the amount of money in circulation and reducing unnecessary expenses. The Central Bank of Nigeria has implemented policies to keep inflation under control by setting specific interest rates, which banks must follow. When interest rates are low, people can borrow more money from banks, and this can lead to more money in circulation, prices increase, and inflation occurs. By implementing higher interest rates, the Central Bank of Nigeria can reduce the amount of money in circulation, which can help reduce inflation.
In conclusion, inflation is a complicated topic, but it is essential to understand why it happens and how it impacts us. In Nigeria, we can all play a role in reducing inflation by being mindful of our expenses, avoiding unnecessary buying, and supporting local businesses. If we work together, we can help keep our economy stable, and our future bright.
