INFLATION AND THE COST-OF-LIVING CRISES

Öz

For many nations around the world, inflation has been a major economic fret. The most severe increase in inflation in over thirty years has impacted fiscal accounts, exacerbated poverty, and changed the distribution of households’ well-being, necessitating a response from policymakers. However, inflation's distributive implications are much more complicated. The study aims to assess the effect of inflation on the cost-of-living crises in Nigeria. Documentary research design was adopted for the study. Findings indicated that Nigeria's inflation rate has been higher than the sub-Saharan and African average for years, surpassing 24 percent in 2023. It also revealed that Nigeria’s inflation keeps devaluing the local currency and lowering citizens’ purchasing power, thus making the poor further poorer and even the working class more susceptible. The study suggests that, to address Nigeria’s inflation and cost-of-living concerns, government must lower its budget deficit and implement substantial structural changes through monetary and fiscal policy.

Anahtar Kelimeler

• Consumer-Price-Index
• Cost-of-living crises
• fiscal policy
• inflation
• interest rate
• monetary policy

INFLATION AND THE COST-OF-LIVING CRISIS: WHAT PUBLIC POLICY OPTIONS FOR NIGERIA TO WEATHER THE ECONOMIC STORM?

Öz

For many nations around the world, inflation has been a major economic fret. The most severe increase in inflation in over thirty years has im pacted fiscal accounts, exacerbated poverty, and changed the distribution of households’ well-be ing, necessitating a response from policymakers. However, inflation’s distributive implications are much more complicated. The study explores the effect of inflation on the cost-of-living cri sis in Nigeria. Utilizing documentary research design, the study examines official publications of government agencies and non-governmental organizations that address inflation trends, cost of-living index and other related macroeconomic indicators in Nigeria. Data obtained were ana lysed using quantitative and qualitative content analysis. Findings indicated that Nigeria’s infla tion rate has been higher than the sub-Saharan and African average for years, surpassing 24% in 2023. It also revealed that Nigeria’s inflation devalues the local currency and lowers citizens’ purchasing power, thus making the poor more impoverished and even the working class more susceptible. The study suggests that, to address Nigeria’s inflation and cost-of-living crisis, the government should implement substantial changes through restrictive monetary policy and adopt fiscal tightening measures – also called contractionary fiscal policy – to foster economic stabilization. 

 

Anahtar Kelimeler

• Consumer-Price-Index
• Cost-of-living crises
• fiscal policy
• inflation
• interest rate
• monetary policy

Kaynakça

1. Abdih, Y., Lin, L. & Paret, A. (2018). Understanding Euro Area inflation dynamics: Why so low for so long? IMF Working Paper WP/18/188.
2. Adenuga, I. A., Taiwo, B. H., & Efe, E. P (2000). Is inflation purely a monetary phenomenon? Empirical investigation from Nigeria (1970-2009). European Scientific Journal, 4(2), 32-50.
3. AfDB (2023). Africa macroeconomic outlook. African Development Bank.
4. AfDB (2024). African economic outlook (Driving Africa’s transformation: The reform of the global financial architecture). African Development bank.
5. Agarwal, R. & Kimball, M. (2022). How costly is inflation? Finance and Development, Analytical Series, April 7. https://www.imf.org/en/Publications/fandd/issues/2022/03/Future-of-inflation-partII-Agarwal-kimball
6. Akinnifesi, E. O. (1984). Inflation in Nigeria: Causes, consequences and control. CBN Bullion, Silver Jubilee Edition, 1, 61-75.
7. Alexova, M. (2012). Inflation drivers in new EU members. National Bank of Slovakia, Working Paper 6/2012.
8. Alli, W. (2024). Cost of living crisis: Nigeria ranked 5th hardest hit African country. Business Day, July 10, 2024.

9. Auer, R., Borio, C. & Filardo, A. (2017). The globalization of inflation: The growing importance of global value chains. BIS Working Papers, No. 602.
10. Ball, L. & Mazumder, S. (2011). Inflation dynamics and the Great Recession. Brookings Papers on Economic Activity, 42(1), 337-381. https://doi.org/10.1353/eca.2011.0005
11. Barrett, P. (2022). How food and energy are driving the global inflation surge. IMF. https://www.imf.org/en/Blogs/Articles/2022/09/09/cotw-how-food-and-energy-are-driving-the-global-inflation-surge
12. Baser Andic, S., Kucuk, H. & Ogunc, F. (2015). Inflation dynamics in Turkey: In pursuit of a domestic cost measure. Emerging Markets Finance and Trade, 51(2), 418-431. https://doi.org/10.1080/1540496X.2015.1019771
13. Bjornland, H. C., Brubakk, L. & Jore, A. J. (2008). Forecasting inflation with an uncertain output gap. Empirical Economics, 35(3), 413-436. https://doi.org/10.1007/s00181-007-0165-y
14. Bobeica, E. & Jarocinski, M. (2019). Missing disinflation and missing inflation: A VAR perspective. International Journal of Central Banking, 15(1), 199-323.
15. Bolhuis, M. A. & Kovacs, P. (2022). Why inflation is one of Africa’s most pressing challenges and how to tackle it. World Economic Forum. https://www.weforum.org/stories/2022/10/inflation-sub-saharan-africa-economy-challenge/
16. Cardoso, E. (1992). Inflation and Poverty. NBER Working Paper 4006. National Bureau of Economic Research.
17. CBN (2011): Understanding monetary policy, Series 1. Central Bank of Nigeria
18. CBN (2015). Understanding monetary policy, Series 55. Central Bank of Nigeria.
19. CBN (2022). Annual economic report. Central Bank of Nigeria
20. CBN (2023a). Annual statistical bulletin. Central Bank of Nigeria
21. CBN (2023b). Macroeconomic outlook for Nigeria. Central Bank of Nigeria
22. CEIC (2023). Nigeria private consumption: % of GDP (Economic indicators). CEIC
23. Chenge, A. A. (2024). Carbon tax strategies: Impact on global renewable energy transitions. In A. Rafay (ed.), Modern concepts and practices of climate finance (pp. 281-324). IGI Global. https://doi.org/10.4018/979-8-3693-2117-1.ch012
24. Ciccarelli, M. & Mojon, B. (2010). Global inflation. The Review of Economics and Statistics, 92(3), 524-535. https://doi.org/10.1162/REST_a_00008
25. Claus, I. (2000). Is the output gap a useful indicator of inflation? Reserve Bank of New Zealand, Discussion Paper DP2000/05.
26. Cloyne, J. & Hurtgen, P. (2016). The macroeconomic effects of monetary policy: A new measure for the United Kingdom. American Economic Journal: Macroeconomics, 8(4), 75-102.
27. Coibion, O. (2012). Are the effects of monetary policy shocks big or small? American Economic Journal: Macroeconomics, 4(2), 1-32.
28. CORE Econ (2025). Inflation and unemployment: How fluctuations in aggregate demand and changes on the supply side of the economy affect inflation and unemployment. https://www.core-econ.org/the-economy/macroeconomics/03-aggregate-demand-15-references.html
29. Dahan, M. (1996). The effect of Macroeconomic variables on income distribution in Israel. Bank of Israel, Economic Review, 69, 19-43.
30. ECB (2017). European Central Bank Economic Bulletin, 4/2017.
31. ECB (2025). ECB data portal: Inflation. European Central Bank. https://data.ecb.europa.eu/main-figures/inflation-and-other-prices/inflation
32. Eurostat (2022). Inflation in the Euro Area. https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Inflation_in_the_euro_area
33. Fashoyin, T. (1986). Incomes and inflation in Nigeria. Longman Publishers Limited.
34. FocusEconomics (2024). Nigeria economic data and projections. FocusEconomics.
35. FocusEconomics (2025). Nigeria inflation rate: Forecast and outlook. FocusEconomics
36. Furuoka, F. (2016). A scientific inquiry on the estimation of the Phillips curve in the Baltic region. Engineering Economics, 27(3), 276-284. https://doi.org/10.5755/j01.ee.27.3.6896
37. Gali, J. (2000). The return of the Phillips curve and other recent developments in business cycle theory. Spanish Economic Review, 2(1), 1-10. https://doi.org/10.1007/s101080050014
38. Globan, T., Arcabic, V. & Soric, P. (2016). Inflation in new EU member states: A domestically or externally driven phenomenon? Emerging Markets Finance and Trade, 52(1), 154-168. https://doi.org/10.1080/1540496X.2014.998547.
39. Halka, A. & Kotlowski, J. (2017). Global or domestic? Which shocks drive inflation in European small open economies? Emerging Markets Finance and Trade, 53(8), 1812-1835. https://doi.org/10.1080/1540496X.2016.1193001
40. Henry, E. A. & Sabo, A. M. (2020). Impact of monetary policy on inflation rate in Nigeria: Vector Autoregressive Analysis. CBN Bullion, 44(4), 78-90.
41. Hourston, P. (2022). Cost of living crisis. Institute for Government.
42. IMF (2021). Fiscal monitor database of country fiscal measures in response to the COVID-19 pandemic. International Monetary Fund.
43. IMF (2022). Tackling rising inflation in Sub-Saharan Africa. Regional economic outlook: Sub-Saharan Africa. International Monetary Fund.
44. IMF (2022). World economic outlook. International Monetary Fund.
45. IMF (2023). Inflation and disinflation: What role for fiscal policy? International Monetary Fund
46. Jain, A. & Khatri, D. (2023). Inflation shock hits Africa: How to protect the most vulnerable from rising fuel and food costs. Nanyang Technological University, Singapore. https://www.ntu.edu.sg/cas/news-events/news/details/inflation-shock-hits-africa
47. Jayadev, A. (2006). Differing preferences between anti-inflation and anti-unemployment policy among the rich and the poor. Economics Letters, 91(1), 67-71
48. Jordan, T. (2016). The impact of international spillovers on Swiss inflation and the exchange rate. Journal of International Money and Finance, 68, 262-265. https://doi.org/10.1016/j.jimonfin.2016.02.005
49. Kaplan, G. & Schulhofer-Wohl, S. (2017). Inflation at the household level. Journal of Monetary Economics,91, 19-38.
50. Karabarbounis, L. & Neiman, B. (2013). The Global decline of the labour share. NBER Working Paper 19136.
51. King, R. G. & Watson, M. W. (2012). Inflation and unit labour cost. Journal of Money, Credit and Banking, 44(2), 111-149. https://doi.org/10.1111/j.1538-4616.2012.00555.x
52. Lanne, M. & Luoto, J. (2013). Autoregression-based estimation of the new Keynesian Phillips curve. Journal of Economic Dynamics and Control, 37(3), 561-570. https://doi.org/10.1016/j.jedc.2012.09.008
53. Lawless, M. & Whelan, K. T. (2011). Understanding the dynamics of labour shares and inflation. Journal of
54. Macroeconomics, 33(2), 121-136. https://doi.org/10.1016/j.jmacro.2010.11.002
55. MacroTrends (2023a). Inflation rate by country: Nigeria. MacroTrends.
56. MacroTrends (2023b). Sub-Saharan Africa inflation rate. MacroTrends.
57. Masha, I. (1996). New perspective on inflation in Nigeria. CBN Economic & Financial Review, 38(2), 34-56.
58. Mbutor, M.N, (2010). Can monetary policy enhance remittances for economic growth in Africa? The case of Nigeria. Journal of Economics and International Finance, 2(8), 156-163.
59. Mehra, Y. P. (2004). The output gap, expected future inflation and inflation dynamics: Another look. The B. E. Journal of Macroeconomics, 4(1), 1–19. https://doi.org/10.2202/15345998.1194
60. Mihajlovic, V. & Marjanovic, G. (2020). Asymmetries in effects of domestic inflation drivers in the Baltic States: A Phillips curve-based nonlinear ARDL approach. Baltic Journal of Economics, 20(1), 94-116. https://doi.org/10.1080/1406099x.2020.1770946
61. Nagy, E. E. & Tengely, V. (2018). External and domestic drivers of inflation: The case study of Hungary. Russian Journal of Money and Finance, 77(3), 49–64. https://doi.org/10.31477/rjmf.201803.49
62. NBS (2022). Consumer Price Index (CPI) and inflation report. National Bureau of Statistics.
63. NBS (2023a). Consumer Price Index (CPI) and inflation report. National Bureau of Statistics.
64. NBS (2023b). Nigerian Gross Domestic Product (GDP) report (Expenditure and income approach). National Bureau of Statistics.
65. Neiss, K. S. & Nelson, E. (2005). Inflation dynamics, marginal cost, and the output gap: Evidence from three countries. Journal of Money, Credit and Banking, 37(6), 1019–1045. https://doi.org/10.1353/mcb.2006.0008
66. Ngerebo, A. T. A. (2016). Monetary policy and inflation in Nigeria. International Journal of Finance and Accounting, 5 (2), 67-76.
67. Nwosa, P. I., Olaiya, S.A., & Amassoma, D., (2010). An appraisal of monetary policy and its effects on macroeconomic stabilization in Nigeria. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 2(3), 232-237.
68. O’Neil, A. (2024). Nigeria: Inflation rate from 2008 to 2029. Statista.
69. Odonye, O. J., Odeniran, S. O., Oduyemi, A. O., Olaoye, O. J. & Ajayi, K. J. (2014). An examination of the structural inflation dynamics in Nigeria. Economic and Financial Review, 52(1), 65-86. https://dc.cbn.gov.ng/efr
70. Oduu, O. (2022). Nigeria inflation rate increased in February, now 15.7%. Dataphyte.
71. Okafor, P. N. (2009). Monetary policy framework in Nigeria: Issues and challenges. CBN Bullion, 33(2), 23-34.
72. Olowo, S. T. (2003). Explaining inflationary pressure in Nigeria: The Structuralists' Approach. Kogi State Polytechnic Journal, 1(1), 89-97.
73. Olubiyi, T. (2024). Cost of living crisis, where is the minimum wage? Business Day, November 18, 2024
74. Onaran, O. (2022). The political economy of the cost of living crisis in the UK: What is to be done? Political Economy Research Institute (PERI), University of Massachusetts Amherst.
75. Oner, C. (2017). Inflation: Prices on the rise. International Monetary Fund. https://www.imf.org/en/publications/fandd/issues/series/back-to-basics/inflation
76. Onimisi, P. D. (2023). Inflation in Africa and the DFIs. Association of African Development Finance Institutions.
77. Oyadeyi, O., Ukoli, K., Chandiramani, A., Rosas, J., Luo, J. & Oyadeyi, A. O. (2024). The cost of living crisis in Nigeria: The impact of food and commodity prices on household purchasing power and their implications on wellbeing. SSRN. https://dx.doi.org/10.2139/ssrn.4866006
78. Peneva, E. V. & Rudd, J. B. (2017). The passthrough of labour costs to price inflation. Journal of Money, Credit and Banking, 49(8), 1777-1802. https://doi.org/10.1111/jmcb.12449
79. Pettinger, T. (2022). Causes of the cost of living crisis explained. LMH, Oxford University.
80. PGP Foundation (2023). How can fiscal policy help to reduce inflation. Peter G. Peterson Foundation. Prati, A. (2022). The well-being cost of inflation inequalities. The Review of Income and Wealth, 1-26. https://doi.org/10.1111/roiw.1263
81. Saman, C. & Pauna, B. (2013). New Keynesian Phillips curve for Romania. Romanian Journal of Economic Forecasting, 2/2013, 159-171. https://ssrn.com/abstract=2387371
82. Scheve, K. (2001). Public attitudes about Inflation: A comparative analysis. Bank of England Quarterly Bulletin (Autumn), 283-294.
83. Shiller, R. J. (1997). Why do people dislike inflation? In C. D. Romer, & D. H. Romer (eds), Reducing Inflation: Motivation and Strategy (pp. 13-70). University of Chicago Press.
84. Sowa, N. K. & Kwakye, J. K. (1993). Inflationary trends and control in Ghana. African Economic Research Consortium (AERC), Research Paper 22.
85. Tatierska, S. (2010). Do unit labour costs drive inflation in the Euro Area? National Bank of Slovakia Working Paper 2/2010.
86. Totonchi, J. (2011). Macroeconomic theories of inflation. International Conference on Economic and Finance research, 14, 459-462.
87. Tsiaplias, S. & Wang, J. (2023). The Australian economy in 2022-23: Inflation and higher interest rates in a post-COVID-19 world. The Australian Economic Review, 56(1), 5-19.
88. Vipond, T. (2025). Inflation: A guide to what inflation is, how it works, and why it is important. Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/economics/inflation
89. White, L. H. (2024). Inflation. The Library of Economics and Liberty
90. World Bank (2023). Global economic prospects. World Bank.
91. Yeldan, E. (1999). Dynamic of macroeconomic disequilibrium and inflation in Turkey: The state, politics and the market sunder in globalised economy. Department of Economics, Bilkent University Working Paper.
92. Zivkov, D., Duraskovic, J. & Manic, S. (2019). How do oil price changes affect inflation in Central and Eastern European countries? A wavelet-based Markov switching approach. Baltic Journal of Economics, 19(1), 84–104. https://doi.org/10.1080/1406099X.2018.1562011