What is inflation? What efforts have been made by the government to combat inflation in Nigeria?
Explanation
Inflation can be defined as a persistent rise in the general price level of goods and services. This occurs when the volume of purchasing is permanently running ahead of production and too much money is chasing too few goods.
Various governments in Nigeria have attempted to combat inflation through the following ways:
(i) It is argued that inflation is caused by increased money supply and the government have been reducing the supply of money using the instruments of open market operation, cash-deposit ratio, moral persuasion etc.
(ii) The government has introduced some fiscal measures to reduce inflation. Fiscal measures can be implemented by means of increased taxation and reduction in government expenditure.
(iii) Industrialization will reduce over reliance on imported goods and bring about increase in output which will reduce prices.
(iv) Reduction in aggregate money supply can be achieved through a reduction in government spending.
(v) The activities of hoarders should be checked to prevent increase in prices of goods.
(vi) The use of effective price control system through the establishment of Price Control Board