Nigeria's inflation rate is on the rise again. The 20-month inflation rate rose from 11.02 percent in August 2019 to around 18.17 percent in March 2021, a rise of about 20 percent.
In 1981, $1 was equal to 53 kobos (N0.5311); to put this in perspective, 1 million Naira was worth more than 1.5 million dollars.
Ten years later, in 1991, 1 million Naira became $102,000 (about 1500% lower in value for the Naira).
20 years later, in 2001, 1 million Naira was worth $8,800 (another 1000% devaluation for the Naira).
In 2011, 1 million became the equivalent of $6300, and now in 2021, 1 million Naira is equivalent to $2,500.
What is your biggest guess for how much a million naira will be worth in the next ten years? Your guess is as good as ours.
With this fact established, it is clear that there is a major reason the Naira has suffered a massive decline over the years.
Food price inflation, which was 22.95 percent in Q4-2020, was identified as a significant cause of Nigeria's current inflation by the Central Bank of Nigeria in its Q4-2020 economic report. Food price inflation has reached its peak in the last fifteen years.
Before 2021, the last time food price inflation of over 20% was in July 2008 (20.9%), and the previous occasion was in October 2005. (24.6 percent ). As a result, food price inflation trends in 2021 are exceptional.
According to Investopedia, inflation is the decline of purchasing power of a given currency, i.e., a currency doesn't have the power to purchase the same item any more or can only purchase that item at a higher price.
This becomes apparent with the increase in the average price of commodities in the entire country. The currency can buy less than it used to before.
The rate of inflation affects everyone who earns and spends in Naira. It might take up to two years or more for a salary increase for the average employee in most enterprises.
They'd be earning less owing to inflation if the salary raise isn't at least 25 percent more than the prior paycheck. Most firms, however, cannot afford to give their employees a 25 percent increase every two years.
Savers have been stung the hardest by inflation, as their money has lost value. Since the inflation rate in Nigeria considerably outpaces the interest rates offered by banks.
To demonstrate how terrible the situation is, a 10% compound interest rate to the inflation rate over 20 years still failed to catch up.
It should be mentioned that Nigerian banks do not provide savings rates of up to 10%. Polaris Bank, for example, one of the country's largest Tier 2 banks, pays 1.75 percent interest on deposits.
Depending on the amount fixed, fixed deposit accounts can earn up to 6% per year.
High inflation is a worry for consumers because it may have catastrophic impacts on their purchasing power.
Investors need to ensure that their assets are distributed to maximize their chances of earning real returns to safeguard and build their wealth.
Spending power downturn implies that the number of products and services a customer can buy for a certain price decreases with time. Individuals' level of living is impacted by declining purchasing power, forcing them to make sacrifices.
Increasing your income as quickly as possible is the best way to combat the loss of spending power.
Negotiating a raise, starting a side business (such as online shopping, teaching, etc.), transferring professions, or acquiring extra credentials to improve your abilities and market your brand are all options.
One cause of inflation is the high cost of production. A few years ago, it was reported that a popular Nigerian bank - GTBank, spent around 7 billion Naira on diesel in a year.
Imagine how much less this would have been if Nigeria had a stable power supply.
Because of these high operation costs, organizations would pass this down to their customers in maintenance fees or higher prices for services.
There are three main ways inflation comes into an economy; firstly, when there is more demand for goods than is available.
A major example of this was when there was panic in Nigeria that there would be fuel scarcity. This is also called Demand-pull inflation.
The second way is the Cost-push inflation, where the cost of raw materials becomes so high that the producers or manufacturers pass down this anomaly to the final consumer.
Case in point, if the cost of PMS increases from N165 per liter to N250, this would imply the local rice seller paying double to transport his goods from one point to the other, and the masses are the ones that bear the brunt of this.
Thirdly, we have Built-in Inflation (which is more common in Nigeria).
This one plays on the expectations of the people's minds where they believe or fear that prices of commodities will rise; it involves people subjectively believing that something would happen.
The average Nigerian works in a state of trepidation that the Naira would plunge even further compared to the US Dollar.
The masses are using Bitcoin to preserve the value of their money to buy things like milk and eggs. Cryptocurrencies are also seen as a means for Nigerians to avoid foreign exchange restrictions.
Nigeria is home to approximately 32 percent of the world's crypto users, according to Statista's latest poll.
The country was also placed seventh in Chainalysis' crypto usage report for 2020.
Last autumn, when activists with the "EndSARS" movement used bitcoin to gather donations to protest police brutality in Nigeria, interest in crypto soared.
Adoption appears to be aided by economic considerations as well.
Bitcoin is the reverse of the Naira since it is a decentralized currency, meaning a central bank or entity does not govern it.
The coin's movement is determined by market forces, with all users having a stake in the cryptocurrency's path.
Because of this, events such as regional wars, government, or policy changes have no bearing on the coin's value.
This is one of the main reasons why Bitcoin is becoming more widely accepted throughout the world.
Many users feel secure using a coin that is unaffected by political intervention.
It's no surprise that people of underdeveloped nations like Nigeria have been interested in blockchain networks in recent years.
Needless to say that, unlike traditional currency (Naira), Bitcoin has a finite quantity of BTC that can be generated (21,000,000 BTC).
Much more so than the Naira, which the government may decide to manufacture additional copies of, it is difficult for the currency to become an inflation coin.
Inflation is a well-known reality that occurs when there is a large amount of money in circulation. This is avoided with Bitcoin since the amount of circulating BTC is known, keeping the coin stable and inflation resistant.
Hundreds of merchants now accept Bitcoin payments; thanks to heavyweights like Overstock.com jumping on board, it is now possible to transact (buy) any physical item using Bitcoin units.
In a bid to reduce exposure to government-controlled money - the Naira, Bitcoin's growing mainstream acceptance is a big help.
The overall expenses of converting Naira to the recognized currency and bank charges are a big problem for Nigerians when purchasing products or services from overseas merchants.
You may be asked to pay up to 25% in fees for goods and services that may be avoided if you use Bitcoin.
Bitcoin excludes third-party agents from transactions and instead relies on exchanges, effectively eliminating transaction costs.
The primary perk of Bitcoin for many users and one of the central tenets of cryptocurrency more generally is "Autonomy."
Bitcoin allows Nigerians more autonomy over their own money than the Naira.
At least, in theory, users can control how they spend their money without dealing with an intermediary authority like a bank or the government.
Because Nigerians can send and receive BTC with only a smartphone or computer, Bitcoin is theoretically available to a population of users without access to traditional banking systems, credit cards, and other methods of payments.
Bitcoin is an excellent long-term investment since the currency price has been steadily rising for several years (though temporarily hampered by the recent market correction).
A smart piece of business is to invest in Bitcoin instead of saving money in the bank because the cryptocurrency tends to rise in value.
Bitcoin trading is another option for making everyday transactions in the cryptocurrency market.
Bitcoin makes use of blockchain technology to enable exchanges, resulting in seamless exchanges between users.
Using the conventional financial system, sending or receiving cross-border remittances might take many hours or days. However, with Bitcoin, similar transactions may be done in minutes and a safe setting.
Bitcoin is becoming extremely prevalent in Nigeria, but the Naira will remain the nation's official currency in the near future. Expect the popularity of Bitcoin to keep increasing while economic metrics like inflation persist.
