Inflation is often described as the cruellest tax, which reduces buying power and puts millions of people in impoverished circumstances. For Nigeria, where inflation has soared to a 28-year high of 34.6 percent, this silent tax has become a beast. The federal government wants to bring down inflation to 15 percent by 2025. This may seem like a big goal—a rallying cry for hope in an already troubled economy—but if they don’t fix the problems that cause inflation, it could end up being just another broken promise.
The challenges are monumental. Spiralling food prices, a volatile naira, and excess liquidity have entrenched inflationary pressures, leaving businesses and consumers gasping for relief. The Central Bank of Nigeria (CBN) has responded with aggressive monetary tightening, pushing interest rates from 18.75 percent in 2023 to 27.5 percent this year. While Governor Olayemi Cardoso asserts that inflation will begin easing by 2025, history warns us against undue optimism. Nigeria’s economy will always have problems with inflation as long as there isn’t a clear plan that goes beyond raising interest rates.
“Nigeria’s economy will always have problems with inflation as long as there isn’t a clear plan that goes beyond raising interest rates.”
Nigeria’s predicament is not without precedent. Turkey, faced with hyperinflation peaking at 86 percent in 2022, managed to halve it by 2024 through a combination of bold fiscal restraint, monetary tightening, and structural reforms. By cutting public spending, increasing interest rates to 50 percent, and enhancing productivity, Turkey clawed back economic stability despite geopolitical tensions and currency crises.
Similarly, Argentina offers a sobering lesson. Inflation there breached 200 percent in 2023, forcing President Javier Milei to adopt a stringent fiscal policy, including slashing public expenditure, reducing debt, and curbing money supply growth. While the path was painful, it demonstrated that controlling inflation requires hard-nosed decisions and a willingness to confront entrenched inefficiencies.
Indonesia presents yet another case study, where proactive price regulation and supply chain management kept inflation to a modest 5.95 percent amid global economic turmoil. These examples underscore a common truth: taming inflation demands more than monetary policy. It requires political will, institutional reform, and a commitment to economic resilience.
For Nigeria, the way forward is clear but fraught with difficult choices. First, fiscal discipline must take centre stage. The federal government’s penchant for deficit spending, often financed through central bank overdrafts, fuels inflationary pressures. Reducing public expenditure, particularly on non-productive ventures, is not just advisable—it is imperative.
Second, the naira must be stabilized. Recent attempts to unify exchange rates have faltered, with speculative activity and dwindling foreign reserves exacerbating currency volatility. A robust strategy to boost foreign exchange reserves, possibly through export diversification and remittances, is essential to restore confidence in the naira.
Third, structural reforms must prioritise agricultural productivity. Food prices remain the largest contributor to inflation, and addressing this requires investment in mechanisation, infrastructure, and access to credit for farmers. The agricultural sector, long neglected despite its potential, holds the key to easing inflation’s grip on millions of households.
Finally, institutional reforms are vital. Weak regulatory frameworks and opaque governance undermine investor confidence and stifle economic growth. A transparent and accountable government can lay the foundation for sustainable reforms that outlast political cycles.
Read also: How Nigeria can tame inflation in 2025
The road to economic stability is neither quick nor easy, but delay is not an option. The devastating human cost of unchecked inflation cannot be overstated. It is not merely a statistic—it is a daily struggle for families who can no longer afford basic necessities like food, shelter, and healthcare. It forces businesses to make agonising choices, such as laying off workers or cutting corners on quality, ultimately eroding the foundation of a thriving economy.
For a nation striving for progress and prosperity, persistent inflation erodes hope, stifles ambition, and undermines society. As Milton Friedman aptly observed, “Inflation is taxation without legislation,” silently eroding the purchasing power of citizens and transferring wealth from the poor to the rich. For Nigeria, failing to address inflation decisively risks turning this silent tax into an unbearable burden, one that could potentially destabilise the entire nation.
The lessons from Turkey, Argentina, and Indonesia offer a blueprint, but the success of any strategy depends on Nigeria’s unwavering commitment to decisive action. The time for half-measures, temporary fixes, and superficial reforms is over. This crisis demands a comprehensive and coordinated approach that tackles the problem at its roots.
If the government truly aims to achieve a 15 percent inflation rate by 2025, it must adopt bold, coordinated reforms that address both the symptoms and the root causes of inflation. This requires a multi-pronged strategy that includes not only monetary policy adjustments but also crucial fiscal reforms, structural overhauls of key sectors like agriculture and energy, and a renewed emphasis on good governance and transparency. Anything less would be a betrayal of the Nigerian people’s resilience and hope for a brighter future.
The Nigerian people deserve a government that prioritises their well-being, addresses their concerns, and works tirelessly to create an economy that empowers all citizens and fosters sustainable growth. The time for decisive action is now.
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