Presently Nigeria experiences high inflation level. Is it good or bad? Find out now.
In the modern world and economy, it is often possible to hear about inflation. What does it mean and what shortcomings or advantages does it have? Let's find it out.
Inflation is an increase in prices for goods and services. Quantity of paper money became bigger at this case. Depreciation of currency happens because of it. The population buys fewer goods and sometimes wages grow down, not up.
What is inflation in Nigeria?
Nigeria is the largest producer of oil in Africa. In spite of this, inflation in Nigeria in January has reached 9.6% against increase in prices for food and energy carriers. In March, it was at the level of 12.8%. Fuel crisis and Forex crisis make it higher every month.
There are many inflationary calculators in the Internet. With their help, it is possible to estimate influence of inflation on the value of money and increase in prices over time, and to calculate a rate of inflation for any period.
Causes of inflation
The reasons of inflation are the following:
- Reduction of final cost of all products at the invariable volume of money;
- Growth of public expenditures due to printing of new money;
- Excessive expansion of crediting of the companies and individuals;
- Monopolism in economy (major companies have an opportunity to determine the cost of their production).
Types of inflation
Depending on rates, people allocate the following types of inflation:
- Moderate. Increase in prices makes no more than 10% a year. The cost of money remains. Contracts are signed in nominal prices. The economic theory considers such inflation as the best. It goes due to renewability of the range. It gives the chance to adjust the prices. This inflation can be regulated by the government and market.
- Spasmodic. Increase in prices makes from 10-20 to 50-200% a year. People begin to consider increase in prices in their contracts. The population invests money in material values. This is the inflation, which is difficult operated. Monetary reforms are often carried out. These changes testify to the bad economy, leading to stagnation (economic crisis).
- Hyperinflation. Increase in prices is more than 50% a month. Annual norm is more than 100%. Welfare even of reach people and normal economic relations collapse. This inflation is uncontrollable and demands emergency measures. As a result of a hyperinflation, production and an exchange stop, the actual volume of national production decreases, unemployment grows, the enterprises are closed and there is a bankruptcy of almost everything in the country.
Why inflation is bad?
Of course, this phenomenon has a set of shortcomings. Among them are:
- Depreciation of money;
- Inflation gets into all spheres of economic life and begins to destroy them;
- The state, production, the financial market suffer from it, but people feel all the disadvantages most of all.
Why inflation is good?
Some people believe that inflation has not only minuses, but also pluses. These are:
- Revival in markets;
- Increase of business activity;
- Expansion of production and employment;
- Increase in demand for actions.
Now you know what inflation is and why it is good or bad.
- READ ALSO: What is economics?