EXAMINING THE SOCIO-ECONOMIC IMPACT OF INFLATION ON                                NIGERIAN CITIZENS

CHAPTER ONE

INTRODUCTION

Background of the Study

Generally, inflation is a term used to describe the rate at which the price of goods and services rises over time. Inflation impacts not only the cost of life – items like transportation, power, and food – but also interest rates on savings accounts, company performance, and, as a result, share prices. For many years, digitization has altered the way monetary systems operate, but it has only lately begun to alter their structure more fundamentally, particularly in the face of inflation (Salomon F. Klaus Jürgen & Ulrich 2019). Inflationary indicators show a decrease in the buying power of your money as it prices of good rises. In other words, this has an influence on people's 'purchasing power,' since they can now buy less with their money. Savings, investments, and pensions are all impacted at the same time, thus it's vital for an economy to adopt the best feasible exit strategy to enhance money circulation in the face of inflation, if not in physical currency, then in digital cash, which has been demonstrated to be advantageous by study.

The impact of inflation on economic growth has been a subject of concern for financial analysts, policymakers, and monetary officials in both developed and developing countries. This issue has received serious attention in the midst of the macroeconomic problems (Ndoricimpa, 2020; Seleteng, Bittencourt, & Van-Eyden, 2023). Inflation is an ongoing and consistent increase in the overall prices of goods and services in an economy. However, there is no denying the reality that inflation is experienced in various economies around the world. Perhaps the disparities reside in the temporal aspects, underlying factors, longevity, and current economic circumstances. Additionally, it is sufficient to state that economies of countries, regardless of their level of development, experience an increase in prices. For certain economies, price variations may occur sporadically, whereas for others, there is a persistent and uninterrupted increase in prices. According to Kayode (2020), inflation is a phenomenon characterised by a widespread and prolonged increase in the overall price level in an economy over an extended period of time. This results in a decrease in the purchasing power of the currency due to the continuous rise in the prices of goods and services in the country.  Hossain and Islam (2022) argue that high inflation has a negative impact on economic performance, whereas zero inflation is equally detrimental as it might result in economic stagnation. They suggest that a mild amount of inflation is necessary for economic progress. Inflation is a global issue that affects both emerging market economies and developed market economies. It is not limited to any specific country. Despite being a long-standing challenge, policymakers around the world consider controlling inflation as a top priority. 

Contextually, Nigeria, a nation abundant in both human and natural resources, has faced long-standing challenges of economic instability and enduring inflation. While the Bola Ahmed Tinubu administration, which began in May 2023, has taken over a challenging economic situation marked by elevated inflation, increasing poverty rates, and unemployment. Furthermore, Fatukasi (2022) highlighted that a significant increase in inflation rates can result in significant economic imbalances, including a deficit in the balance of payments, devaluation of the national currency, and a decrease in the purchasing power of the working class. Consequently, this often leads to frequent labour union protests demanding higher wages. The frequent down tooling by workers in Nigeria has a detrimental influence on the economy, as it leads to reduced productivity and paralysis of services, particularly in the educational and health sectors (Abbasov & Karimov, 2020). If the health and educational sectors consistently remain non-functional, the human capital function will experience setbacks, which will ultimately impede the speed of economic development in the country. Therefore, a survey will be conducted in order to examine the socio-economic impact of inflation on Nigerian citizens.

Statement of the Problem

Presently, high inflation continues to be a significant unresolved matter. It is a prominent concern that affects the overall economy of nearly every country worldwide with much impact in Nigeria. According to Lu et al. (2019) and Jia et al. (2019), iinflation has a detrimental impact on the economies of developing countries and in Nigeria, inflation has been a long-standing problem, mostly driven by reasons such as political instability, volatile oil prices, and underlying problems in the economy. The nation's over dependence on oil earnings has rendered it exceptionally susceptible to global oil price fluctuations. 

Notably, prior governments have taken diverse strategies to mitigate inflation, with restricted efficacy. For instance, during the Buhari administration, the Central Bank of Nigeria (CBN) made regular changes to interest rates and implemented strict monetary policies (Umaru and Zubairu, 2022). However, despite these efforts, inflation persisted at a consistently high level, with an average annual rate of approximately 15-18% between 2015 and 2022 (World Bank, 2022). Upon assuming office in 2023, President Tinubu was confronted with the formidable responsibility of tackling these persistent economic issues. The administration implemented many policy initiatives with the goal of stabilising the economy and reducing inflation. An important policy among these is the elimination of fuel subsidies, which aims to lessen the financial strain on the government. However, this decision has received mixed responses due to its direct effect on the cost of living (The Guardian Nigeria, 2023). In addition, the administration prioritised enhancing agricultural production and expanding the economy's range of industries in order to decrease reliance on oil.  Beyond removing subsidies and agricultural production, the government has suggested budgetary measures that focus on enhancing revenue collection and minimising unnecessary spending. Nevertheless, the efficacy of these strategies is yet to be determined. Hence, it is in the light of these that the study seeks to examine the socio-economic impact of inflation on Nigerian citizens.

 1.3  Objectives of the Study

The main purpose of this study is to examine the socio-economic impact of inflation on Nigerian citizens. Specifically, the study will;

1.Determine the extent to which inflation has affected the cost of living for Nigerian citizens.

2.Determine the factors contributing to the inflation rate in Nigeria.

3.Determine the extent to which inflation contributes to hhousing affordability and availability.

4.Determine whether inflation contributes to social unrest and crime rates in Nigeria.

1.4  Research Questions

The following questions have been prepared for the study:

To what extent has inflation affected the cost of living for Nigerian citizens?

What factors contribute to the inflation rate in Nigeria?

To what extent does inflation contribute to housing affordability and availability?

Does inflation contribute to social unrest and crime rates in Nigeria?

1.5 Research Hypotheses

H0: Inflation has no significant socio-economic impact on Nigerian citizens.

Ha: Inflation has a significant socio-economic impact on Nigerian citizens.

1.6 Significance of the Study

The study findings will assist the Nigerian government and policymakers in designing effective economic policies and interventions to mitigate the adverse effects of inflation in the country. NGOs and social activists will be able to advocate for policies that protect vulnerable populations from the adverse effects of inflation. Nevertheless, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to the socio-economic impact of inflation on Nigerian citizens.

1.7 Scope of the study   

The scope of this study is boarded on the socio-economic impact of inflation on Nigerian citizens. Empirically, this study will determine the extent to which inflation has affected the cost of living, the factors contributing to the inflation rate, the extent to which inflation contributes to housing affordability and availability and whether inflation contributes to social unrest and crime rates.

Geographically, the study will be delimited to residents of Lagos state.

1.8 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.9 Definition of Terms

Socioeconomic: refers to the combination of social and economic factors. It encompasses the way in which an individual's social status (including education, occupation, and income) and economic conditions influence their overall quality of life and opportunities.

Inflation: the rate at which the general level of prices for goods and services rises, eroding purchasing power.

Economic:  relates to the economy, which is the system of production, distribution, and consumption of goods and services in a particular country or region.