Inflation Rate of Nigeria (1960-2016)

Sources: https://indexmundi.com

1
 Economic Analysis on Inflation

Oil is a major source of energy in Nigeria and the world in general. Oil being the central
component of Nigerian economy that plays a vital role in shaping the economic destiny of the
country. During 1995, the inflation rate of Nigeria is too high and it is considered as a highest
inflation rate of Nigeria with the 72.84%. Crude oil discovery has had certain impacts on the
Nigeria economy both positively and adversely. On the negative side, this can be considered with
the respect to the surrounding communities within which the oil wells are exploited. Some of
these communities still suffer environmental degradation, which leads to deprivation of means of
livelihood and other economic and social factors. During this year, there was a high inflation rate
due to the increase in cost/price of the oil product.

Election is a process of choosing, by vote, a representative of the people who are

involved. Involvement here refers to being a member of an organization, a community, state, and
nation or world body. In Nigeria, just like everyone other nation, electoral reform is an exercise
that calls for the best hands and experts in the field of politics but the voting system is not
smoothly organized due to the political issues of both representative. By this issues, the inflation
rate of Nigeria becomes higher with the percentage of 57.17%. During that time, Ibrahim
Babangida assumes power in 1985 with an empty promise to return Nigeria to civil rule. His
decision to annul a 1993 election won by Moshood Abiola throws the country into a political
crisis and forces his resignation. Violent clashes between Muslims and Christians increase
dramatically when Nigeria registers as a member of the Organization of the Islamic Conference
in 1986. During this year, there was a high inflation rate due to the political crisis experienced by
the country.

During this year, the evolution of the foreign exchange market in Nigeria up to its present
state was influenced by a number of factors such as the changing pattern of international trade,
institutional changes in the economy and structural shifts in production. As a result of volatility
in rates, further reforms were introduced in the Foreign Exchange Market in 1994. These
included the formal pegging of the naira exchange rate, the centralization of foreign exchange in
the CBN, the restriction of Bureaux de Change to buy foreign exchange as agents of the CBN,
the reaffirmation of the illegality of the parallel market and the discontinuation of open accounts
and bills for collection as means of payments sectors. By this issues, the inflation rate of Nigeria

2
becomes higher with the percentage of 57.03%. During this year, there was a high inflation rate
due to the evolution of the foreign exchange market in Nigeria.

In this economic analysis, we can empirically verify that the impact of crude oil on the
Nigerian economy has had a positive impact on the economic growth in Nigeria but its not
significantly improved the growth of economy due to many factors like corruption and poor
administration. Part of the citizens of Nigeria, crude oil brings a negative impact due to the
misappropriation of public funds. Foregoing, the electoral reform didnt monitor properly since
there are political issues between the two candidates that greatly affects the public trust. The FX
Market Rules has witnessed tremendous changes. It has been established that scarcity in the
official sector and necessitated the growth and development of parallel market.

All of this significant peaks of Nigeria as to relate to Inflation rate, the society and the
people itself suffered from environmental degradation and the growth and development of
Nigeria is extremely low, the nation has a difficulty in maintaining the price stability and the
available resources are low due to the increase of unemployment regarding in producing goods
and services.

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 Unemployment Rate of Nigeria (1960-2016)

25

20

15

10

0
60 962 964 966 968 970 972 974 976 978 980 982 984 986 988 990 992 994 996 998 000 002 004 006 008 010 012 014 016
19 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2

Unempl oyment Rate

Sources: http://iiste.org
http://tradingeconomics.com
http://www.thetidenewsonline.com
https://freedomhouse.org
https://www.ft.com
https://www.fairobserver.com

4
 Economic Analysis on Unemployment

Political violence escalated in Nigeria in the run-up to presidential and legislative

elections scheduled for 2003, raising fears that the country will struggle to have its first peaceful
transfer of power from one civilian government to another. A voter registration exercise held in
September was disastrous. The federal government faced international criticism about harsh
sentences handed down by Sharia (Islamic law) courts in the north of the country. In 2003, the
total population of Nigeria decreased due to the increasing political violence during the election.
This economic issue led to high unemployment rate since the labor force decreased. Hence,
during 2003, the unemployment rate of Nigeria is high which has a rate of 14.80%. There was a
high unemployment rate due to the increasing political violence in Nigeria. In relation to the
inflation rate, if the number of unemployed population increase then, the economy will have less
income which would result to lower demand on goods and services. Thus, the inflation rate will
also decrease due to these circumstances.

Nigerias oil production has dropped to 1.65m barrels a day because of the resurgence
of militant activity in the southerly Delta region for the lowest output in 22 years. Due to this
event, the production of oil began sliding in February when a new militant group calling itself
the Niger Delta Avengers claimed an attack on an underwater pipeline running that forced Royal
Dutch Shell to shut down its Forcados export terminal, knocking off at least 250,000 bpd. The
government has planned to reopen it but it is not clear if repairs have started. The new group has
vowed to bring Nigerias oil output to zero. The uptick in unrest in the Deltaand the impact on
oil productioncomes as the Muhammadu Buhari administration is confronting the worst
economic crisis in decades due to the oil price collapse. Most of the 36 state governments of the
federation are unable to pay salaries regularly. In 2008, the oil production of Nigeria intensely
decreased due to the attacks of the militants called the Niger Delta Avengers. This group attacked
the oil systems in Nigeria which resulted to a worst economic crisis in the country since, oil is
their highest output of production. This issue affected the regularly pay of salaries to the
employee. Due to this issue, large number of labor force lost their jobs. Thus, the unemployment
rate of the country increased to 14.90%. In relation to the inflation rate, there was a decrease on
it since large number of employees lost their jobs and became unemployed.
Boko Haram has waged an increasingly bloody insurgency since 2009 in an attempt to
create an Islamic state in Nigeria. Nigerias government has been facing mounting pressure both

5
at home and abroad to do more to tackle the group and bring about the release of more than 300
schoolgirls kidnapped by the group on April 15. President Jonathan originally declared a state of
emergency in the three northern states where Boko Haram is, and has been, most active. Boko
Haram strike by stepping up its bombing campaign in cities and launching mass attacks on small
towns and villages. During the year 2009, this terrorist group attempted to create an Islamic State
which resulted to the mounting pressure encountered by the government of Nigeria. This issues
effect was poverty and lack of education. Like the year 2008, the Nigerian citizens also
experienced violence from the Islamic group. In result of the pressure, Nigerias presidents
declared a state of emergency. Because of the fear and disruptions caused by the terrorists to the
citizens and its environment, large number of the population were unemployed. The inflation rate
this year was low, since the unemployment rate of Nigeria this year was the highest rate which is
19.70%.

The worst economic crisis in Nigeria greatly affect the economy as a whole. Most of
the issues which caused this crisis was because of the terrorist groups who attacked and
pressured the people in Nigeria especially its government. Since unemployment rate is usually
used to measure the health and wealth of the economy of a nation, Nigeria gained a high
unemployment rate because of the economic crisis, particularly due to the intense decrease of the
oil production in the country. Politics, in this sense, is volatile to the crisis experienced by the
country. Thus, corruption should be completely eliminated from the system to pave way for the
creation of jobs in the country. Then, the problem with poverty and lack of education in the
country will also be solved.

6
 Foreign Direct Investment, net inflows as % of GDP (1960-2016)

12

10

0
60 962 964 966 968 970 972 974 976 978 980 982 984 986 988 990 992 994 996 998 000 002 004 006 008 010 012 014 016
19 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2

-2

Forei gn Di rect Investment

Sources: http://data.worldbank.org

7
 Economic Analysis on Investment

The World Bank-sponsored Structural Adjustment Program (SAP) is launched,

emphasizing economic discipline, deregulation, and austerity. SAP allows market forces, not
government to dictate the economic environment. Measures include devaluing the Naira,
slashing public spending, stimulating exports and the private sector, removing import licences,
and reducing tariffs. During this period, the Nigerian authorities have been trying to attract
foreign direct investment via various reforms including the deregulation of the economy and the
new industrial policy of 1989 in Nigeria. According to Ajakaiye (1995), the high bank lending
rate that existed during the early days of deregulation (1987-1990) has affected internal rate of
return (IRR) on investment negatively, thereby boosting investment inflows. High foreign direct
investment does not only provide developing countries like Nigeria much needed capital for
investment, it also enhances job creation and managerial skills, and possibly technology transfer.
That is why, due to Nigerias high FDI in 1989, the countrys unemployment rate is within the
range of achieving full employment. And since their economy experienced full employment, the
countrys income also increased, demand for goods and services increased which led to the
countrys high inflation rate.

The relative rise in the share of foreign direct investment in capital formation since 1993
has been due to rapid loosening of controls and regulations on the activities of the multinational
corporation in Nigeria. During these years, the Nigerian Investment Promotion Commission
(NIPC) Act dismantled years of controls and limits on foreign direct investment (FDI), opening
nearly all sectors to foreign investment, allowing for 100% foreign ownership in all sectors (with
the exception of the petroleum sector, where foreign direct investment is limited to joint ventures
or production sharing contracts), and creating the Nigerian Investment Promotion and
Commission (NIPC) with mandate to encourage and assist investment in Nigeria. Also, during
these periods, foreign investors receive largely the same treatment as domestic investors in
Nigeria, including tax incentives. Privatization in Nigeria during these years, brought more than
nothing but low unemployment rate, increase in producers prices and increase in import, export
rates and ultimately inflation rate.

8
 In 2009, the United Nations Council on Trade and Development (UNCTAD) published an
investment policy review of Nigeria and a Blue Book on Best Practice in Investment Promotion
and Facilitation. The policy review identified Nigerias need to diversify FDI away from oil and
gas sector by improving the regulatory framework, investing in physical and human capital,
taking advantage of regional integration and reviewing external tarrifs, fostering linkages and
local industrial capacity, and strengthening institutions dealing with investment and related
issues. Due to neglecting the oil and gas sector or the agricultural sector in Nigeria during this
period, the employment capacity is very low. The resulting effect is the large number of job
seekers who have no place in the oil industry. This high unemployment rate in Nigeria during
2009, led to countrys low income, reduced demand for goods and services and ultimately led to
decrease of the countrys inflation rate.

Based on the graph presented about the Foreign Direct Investment of Nigeria, it can be
observed that the said country had experienced declining and fluctuating foreign investment
inflows. Policy design narrowed the scope for FDI and decades of political instability, economic
mismanagement and widespread corruption reduced Nigerias ability to attract and retain FDI.
The deregulation policies of the Nigerian economy particularly through reduction in government
intervention or interference in economic activities have encouraged and boost foreign direct
investment inflows in various sectors in the Nigerian economy. In order for Nigeria to attract
more foreign direct investment, the said country must expand its GDP through production
incentives; they must also further deregulate the countrys economy through privatization and
reduction of government intervention in economic activities; the said country must also
strengthen its political institution to sustain on-going democratic process; and lastly, it must
increase its investment for the development of the countrys infrastructure.

9
 GDP Growth Rate with Business Cycle in Nigeria (1960-2016)

Sources: http://nigeria.opendataforafrica.org
http://allafrica.com
https://en.m.wikipedia.org
http://moderndiplomacy.eu

10
 Economic Analysis on Business cycle

Trough to Expansion Stage. In 1967-1969, the level of economic activity has obviously
declined sharply since the start of the Nigerian Civil War. Exports have virtually ceased.
Industries dependent on imports generally have ceased production, and trade with the rest of
Nigeria has been greatly reduced. When per capita income probably dropped slightly, Nigerias
economic growth rate declined. Overall economic activity has been slowed down by the
separation of Biafra from the Federal economy and by the uncertainties and dislocations caused
by the civil war and the 18 months of deepening crisis preceding it. Because of the civil war,
inflation rate slipped down due to some factors like the decrease in the unemployment rate of
Nigeria.

Peak Stage. In 1970, Nigeria began to revise their foreign policy after the civil war. His
main focus is to point out the lessons that the country learned during the war, and how it would
affect the way that the country would change their foreign policy. The country needed to create
their own resources to provide better living situations and better protection rather than only
relying on other countries to give them what they needed. They began to understand that they
needed to learn the importance of propaganda, because Biafra was advancing much more
because of their connections with external forces. The civil war helped the government realize
what they needed to fix in their policies to make them a stronger country individually and
internationally. There is low unemployment rate in the year 1970 so in application of the Philipps
curve, the inflation rate is quite high. This lead to the increase of savings and investment and lead
to an increase in economic growth

Trough to Expansion Stage. In 2002-2004, the analysis finds that the largest economic
effects of the crisis are not as a result of the direct costs (mortality, morbidity, care giving, and
the associated losses to working days) but rather those resulting from aversion behavior driven
by fear of contagion. This in turn leads to a fear of association with others and reduces labor
force participation, closes places of employment, disrupts transportation, and motivates some
government and private decision-makers to close sea ports and airports. In the recent history of
infectious disease outbreaks such as the SARS epidemic of 2002-2004, the analysis notes that
behavioral effects have been responsible for as much as 8090% of the total economic impact of
the epidemics. The findings of the analysis underline the need for a concerted international

11
response. External financing is clearly needed in the country, and the impact estimates suggest
that containment and mitigation expenditures as high as several billion dollars would be cost-
effective if they successfully avert the worse scenario.

Peak Stage. In an update released in 2004, the UN found that Nigeria was making
progress toward achieving several goals. Specifically, Nigeria had advanced efforts to provide
universal primary education, protect the environment, and develop a global development
partnership.

Contraction to Trough Stage. In 2004-2006, the relationship between Africa and China
has so far not been particularly perfect and harmonious. The most salient example of this is
perhaps the reality that China has tended to export more to the continent than the other way
round. Even though there are more than fifty African countries, the balance of trade is tipped in
favor of China. Looking at the characteristics of the trade, an even more oblique picture emerges
as it is clear that China mainly imports mineral resources (timber and forestry from Gabon,
copper from Zambia, cobalt from the Democratic Republic of Congo, and oil from Angola to
mention a few) and in turn exports into the continent manufactured textiles and technologies
which, because of their affordability, tend to bring about a crowding-out effect on the continents
domestic producers. In fact, trade unions have been at the forefront of attempting to curb Chinas
access to African markets. The Congress of South African Trade Unions in South Africa
launched a buy local campaign that was motivated by a perceived threat posed by China in
2012. Moreover, more jobs have allegedly been threatened in the West African coast by alleged
illegal fishing by Chinese nationals. Furthermore, less than optimum conditions in Chinese-
owned factories in Zambia led in 2004 to the death of close to 40 employees in an explosion.
And throughout the window period in which African countries were given access to US markets
by the American Growth Opportunity Act, Chinese companies allegedly took advantage of that
and set-up and registered businesses in Africa so as to gain access to the US market for
themselves.

NIGERIA Gross Domestic Product and Expenditure at Current Purchasers Values

(Naira Million)
2007 & 2010

2007 2010

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 GOVERNMENT FINAL CONSUMPTION
2,608,600.00 4,265,932.00
EXPENDITURE
PRIVATE FINAL CONSUMPTION
15,682,906.30 17,539,049.52
EXPENDITURE
INCREASE IN STOCKS 1,570.63 1,896.43
GROSS FIXED CAPITAL FORMATION 1,935,040.14 4,007,832.40
EXPORTS OF GOODS AND SERVICES 7,063,059.54 13,441,327.36
LESS IMPORTS OF GOODS AND SERVICES 6,350,265.70 9,757,874.28
EXPENDITURE ON THE GROSS 20,940,910.90 29,498,163.43
DOMESTIC PRODUCT
COMPENSATION OF EMPLOYEES 1,143,876.20 1,146,039.30
OPERATING SURPLUS 19,236,854.45 27,691,565.46
CONSUMPTION OF FIXED CAPITAL 276,587.01 270,419.69
INDIRECT TAXES 314,545.46 429,882.71
LESS SUBSIDIES 30,952.23 39,743.73
GROSS DOMESTIC PRODUCT 20,940,910.90 29,498,163.43

Source: https://www.proshareng.com/news/NigeriaEconomy/Outlook-for-Nigerian-
Economy-in-2010

The existence of trade unions in South Africa and Nigeria in the global economic crisis
led to no procedures that give unions an institutionalized say in policy making. There is an
element of lobbying in relation to the National Assembly, and unions and employers act together
in petitioning the government on grievances that are specific to a particular sector, for instance,
the textile industry where they make joint demands on tariffs, customer services, illegal imports,
and public subventions. The primary avenue, however, lies in the ability of the unions to rally
other social groups, such as students, market women, and professional associations, in support of
a particular policy or, rather, in opposition to government policy. In recent years, the Labor and
Civil Society Coalition (LASC) has provided a forum for such alliances. In the absence of
credible political institutions for popular representation, the trade unions in Nigeria are assigned
a leading role in voicing poplar grievances.

13
 The unions in the two countries play a critical role in enforcing a popular democratic
response to the crisis. Their mode of insertion in a highly unequal global order defines a
commitment to the modernization of society in opposition to the prevailing market economy.
Their credibility as part of the popular democratic forces, however, depends not only on their
ability to represent the interests of their members, but also on the way they fight for the right to
voice grievances and to organize in their societies more broadly.

During the period 2008 into the better part of 2009, the global economy witnessed
immense shocks with resultant financial sector crisis and economic meltdown that affected
almost every economy across the globe. The Nigerian economy was not left out. World growth
was projected to contract by about 1% in 2009 and to expand by about 3% in 2010, which is well
below the rates achieved before the crisis. The global economic crisis has led to decline in global
flows of trade, which has led to reduced economic output with adverse consequences on living
standards and job creation, throwing most leading economies into recession.

For the Nigerian economy, 2009 was certainly a year during which the challenges posed
to the world economy brought unusual uncertainty to the Nigerian economy. The unintended
consequences of the post consolidation banking reforms led to tight monetary and credit
conditions. However, fiscal developments during 2009 continued to support macroeconomic
stability as well as increased spending on critical infrastructures to diversify the base of the
economy. This trend is expected to be sustained in 2010.

A concerted pursuit of this goal will ensure that we turn our economy around over a
relatively short period of time. Nigerias economy in 2010 with economic fundamentals remains
strong and resilient in view of the current effort of government because of its appreciable growth
performance. Because of that, Nigerias investment increases and increases its savings and lead
to the economic growth of the country. The unemployment rate decreased and inflation rate
stabilized that became the reason to develop their economy. Thus inflation rate and
unemployment rate has a big role in the gross domestic product of Nigeria. The economy of
Nigeria faced challenges and problems but they didnt face it alone. Through the help of other
countries they were able to stand again and achieve economic growth.

14