Inflation and currency devaluation
I remembered when we were taught inflation back then in secondary school. I thought a lot about inflation then but I could only relate to just a few examples. I thought it was worse back then without knowing that it was just the beginning.
Inflation is said to be the general increase in the price of goods and services in an economy. This means what we can buy for an amount days ago might not be affordable with the same amount today again. Each unit of currency could only buy a fewer amount of goods and services.
There are causes of inflation and we also have different types of inflation.
Many times we get to experience inflation in different parts of the world and this is due to the economical situation of the country. A country with a good economy will hardly face the so-called inflation. But countries with poor economies are bound to face what is called inflation.
Inflation could be caused by an increase in wages, when employers get paid more than the normal amount they receive then there will be an increase in demand for goods in the market. For example,when a teacher who gets a salary of about 20,000 naira monthly needs to buy stuff in the market, they will demand goods not exceeding their budgets which could amount to 15,000. But all of a sudden the teachers in the federation got a double increase in their salary amounting to 40,000 naira. The next time they are heading to market, the demand they had last month will surely increase from a budget of around 15,000 naira to 30,000 naira, meanwhile, there is no increase in the rate of production of goods and services.
Another cause of inflation is an increase in money supply when the country decides to print out more money into circulation thereby making people access money in excess. This will surely increase the rate of demand and if the producers can't meet up with the demand then there will surely be a scarcity of commodities which will make the price of goods rise rapidly.
The increased price of raw materials is also another way of causing inflation. Raw materials are inputs that a company needs to manufacture its products. They are the source of production. When a company finds it difficult to access raw materials or they get their raw materials for a higher cost then after production there will surely be an increase in the price of such commodities. For example, a company producing cornflakes is finding it difficult to buy maize for production. A bag of maize bought for 10 naira is now 15 naira. After production, if they sell a carton of cornflakes for 200 naira before, it will have to rise to about 250 or 300 naira due to the increase in the price of raw materials. Consumers who got these products at a valued price will no longer have access to them unless they add up more.
Lastly, when there is a decline in productivity the economy is bound to face inflation. This is simply because the rate of demand for such a commodity will be on increase thereby making it a scarce product. Since there is a lower rate of production then the little available one will have to be under competition. The price will keep increasing and only those who can afford it will go for it.
These are causes of inflation and it’s something inevitable in an economy. It can not be stopped but it can be controlled. So when a country faces such crises it is best to take into consideration some control methods for fighting against such inflation.
What’s your experience with inflation in your country??
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