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.