How to stay afloat in the Nigerian economy

The influence of the term “inflation” on our day-to-day lives and our financial security is substantial.

High inflation, in which the cost of basic necessities like food and housing seemingly doubles overnight, is a frequent experience for many Nigerians. However, the country’s current economic problems have made inflation’s pain worse.

Inflation can have many causes and often arises from the complex interplay of several forces inside an economy.

First, let’s define inflation and see how it impacts our lives. Let’s investigate the link between monetary expansion and price increases and look at some concrete ways to weather the storm.

Understanding Inflation in Simple Terms

When the cost of living in general increases over time, we have inflation. When more money (air) is injected into the balloon (the economy), it expands and the price level rises. A rise in the money supply, or the amount of money in circulation, is one of the primary causes of inflation.

The Nigerian economy, like all others, depends on a precarious balancing act. An imbalance between the demand for and supply of goods and services can result when the government or central bank produces or injects too much money into the system. Businesses need to charge more to meet the increased demand, and therefore inflation occurs.

Other major contributors to inflation include:

Monetary Policy: Central banks, like Nigeria’s Central Bank, have considerable sway over an economy’s money supply. Inadequacies or deficient policies, among many other things, are often responsible for increased inflation.

Cost-Push Inflation: Inflation caused by businesses passing on greater production costs to consumers in the form of higher prices is known as cost-push inflation. This may occur as a result of an increase in the price of raw materials, salary increases, or new government laws that force companies to pay more to run their day-to-day operations.

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Fiscal Policy: Government taxation and spending policies are examples of fiscal policies that might affect inflation. For instance, inflationary pressures might result from the injection of more money into the economy as a result of greater government expenditure without an equivalent increase in revenue.

Exchange Rates Changes in currency exchange rates can have an impact on inflation, which is especially true for nations that rely heavily on imports. When the value of a country’s currency declines against those of other countries’ currencies, businesses and consumers often have to pay more for imported goods.

Inflation Expectations: Inflation expectations have the potential to manifest themselves in the form of actual inflation. Consumers and companies might alter their actions if they foresee future price increases. Consumers may feel pressured to buy now in anticipation of future price increases, while corporations may implement price increases in advance.

Strategies for Thriving in an Era of Soaring Prices
In times of rising inflation, it is crucial to use some financial methods to save our savings and keep our standard of living at a sustainable level. To help you keep afloat, consider these suggestions:

One important financial strategy is to spread your income around in order to protect yourself against inflation. Try your hand at some freelance work, start a side business, or invest in some passive income opportunities. You can lessen inflation’s effect on your financial security by increasing the variety of your income streams.

Make a realistic budget and stick to it by carefully monitoring your outgoings. In times of inflation, it is important to prioritise necessary spending and refrain from making impulsive purchases. If you keep careful tabs on your spending, you’ll know exactly where your money is going and be able to save more of it.

The value of your funds may decrease over time due to inflation, so it’s important to invest wisely. Real estate, stocks, and commodities are all good examples of assets that can be used as a hedge against inflation. There is no such thing as a risk-free investment, but with the guidance of a financial counsellor, you may minimise such risks.

You can protect your purchasing power from the effects of high inflation by diversifying your savings and investments and keeping some of your money in a foreign currency. This plan can help you keep more of your money when the local currency drops in value.

In an inflationary climate, prices might fluctuate widely, so it’s important to haggle and look for deals. When making purchases, don’t be afraid to haggle for a lower price. You can make your money go further if you know how to shop smart.

Inflation is a global economic phenomenon. In order to make ends meet in the Nigerian economy, you must have a firm grasp of how it relates to the money supply and what its practical ramifications are.

We may better negotiate the problems of high inflation and ensure our financial future in a shifting economic landscape by diversifying our income, budgeting properly, investing strategically, and discovering bargains.

Knowledge, as they say, is power. Maintain a state of knowledge and proactivity to ride out the storm of inflation with calm assurance.