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You are here:Home>>Strategic Research & Analysis>>Nigeria’s inflation rate is 58.6% not 12.77% - says Prof. Hanke
Monday, 23 May 2016 22:57

Nigeria’s inflation rate is 58.6% not 12.77% - says Prof. Hanke

Written by Emeka Chiakwelu
Professor Stevie Hanke Professor Stevie Hanke

Another bombshell on Nigeria's current inflation rate is coming from Professor Stevie Hanke of applied economics, Johns Hopkins University and director of the Troubled Currencies Project at Cato Institute. He professed  that the discrepancy on the modus of the  tabulation  of Nigeria's inflation rate does not reflect the true reality of the higher  inflationary trends.


Prof. Hanke writes that  the  implied Nigeria’s inflation rate is 58.6 percent not 12.77% as formulated and provided by  Nigeria’s National Bureau of Statistics (NBS) in concert with the  Central Bank of Nigeria (CBN).


Recently, same Prof. Hanke called Nigeria’s naira a junk currency. His words:

"Nigeria is in trouble. Amid double-digit inflation, Nigeria's foreign reserves are dwindling as the government races to shore up a swooning currency, the naira.”


And then he uttered the famous  “J”  word :,

“The currency (naira) is junk and the government is incompetent and corrupt. The only sure-fire way to solve all these problems is for Nigeria to officially replace its junk currency."



Now in his latest commentary titled “Nigeria’s growing economic troubles” he argued that inflation rate calculation and tabulation was much smaller from the real inflationary trends because the Central Bank of Nigeria was assigned  a lower coefficient of 4.6 percent that invariably masks the real inflation rate.



Professor Hanke writes: “This large discrepancy between the most recent official annual inflation rate of 12.77 percent and my implied inflation rate of 58.6 percent calls again for the use of a lie coefficient. The formula for utilizing this lie coefficient is as follows: (official data) × (lie coefficient) = real estimate. At present, the Central Bank of Nigeria’s lie coefficient is 4.6.”



He further argues: “Without a major currency reform (read: the installation of a currency board), the weakness of Nigeria’s naira will not end anytime soon. This is bad news for inflation, which, according to my Cato Troubled Currencies Project estimate, has exploded to an annual rate of 58.6 percent. This is a long way from the official estimate (see the chart below).”



As for me, the point that must be succinctly  made is that the  reality of the surging inflationary trend  is unquestionable and it is self- evident in the lives of Nigerians. The higher food prices, higher transportation fares and increase in price of petrol are making existential question of decent live hoods  unbearable in Nigeria.  We can park numbers, statistics  and tabulations for the experts but we must recognized that things are no longer at ease.



When Prof. Hanke called  naira a "junk currency",  I did categorically disagreed with him because if left unchallenged then he must be right. This time around I would like to disprove him but only CBN and NBS have methodological formula for tabulating inflation rate.



Image result for emeka chiakweluEmeka  Chiakwelu, Principal Policy Strategist at AFRIPOL. His works have appeared in Wall Street Journal, Huffington Post, Forbes and many other important journals around the world. His writings have also been cited in many economic books, publications and many institutions of higher learning including tagteam Harvard Education. Africa Political & Economic Strategic Center (AFRIPOL) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.   This e-mail address is being protected from spambots. You need JavaScript enabled to view it       www.afripol.org

Last modified on Tuesday, 24 May 2016 23:01

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