IMPACT OF INFLATION ON STANDARD OF LIVING IN NIGERIA

IMPACT OF INFLATION ON STANDARD OF LIVING IN NIGERIA

ABSTRACT

The purpose of the study was to assess the impact of inflation/high cost of living among underclass single mothers in Nigeria for the last two years (2010-2011). The study objectives were to assess how the single mothers‟ current economic status has been affected by inflation, to identify social economic challenges faced by single mothers in the study area and to assess the livelihood strategies among single mothers in the area. The target population was underclass single mothers in the Nigeria. The study was based on a sample of 130 female headed households who were single mothers. Data was collected from 8 focused group discussions, interview and non-participation observation. Snowball technique was used to identify the underclass single mothers. Data collected was analyzed both qualitatively and quantitatively. The findings showed that majority of the single mothers had low education level and low paying jobs. A higher number of the single mothers did not purchase the basic commodities or mostly bought in small quantities with very few purchasing in bulk. They earned less than a dollar, had limited disposable income, struggled to purchase essential commodities and lived in abject poverty. Based on the study findings, the researcher recommends that an effort should be made by the government and Central Bank of Nigeria to cushion the single mothers against the harsh economic effects of inflation. Focus should be on enacting effective policies to tame the high inflation rate and strengthen the naira against the dollar so as to improve the living standards of the underclass single mothers and other vulnerable groups.

CHAPTER ONE

This chapter entails background of the study, statement of the problem and purpose of the study. It also contains research questions, objectives of the study, scope of the study, significance, limitations and delimitations.

1.1 Background

World prices of wheat, coarse grains, rice and oil seed crops all nearly doubled between the 2005 and 2007 marketing years and continued rising in early 2008. These increases in agricultural commodity prices were a significant factor in driving up the cost of food and led to a fuller awareness and a justifiably heightened concern about problems of food security and hunger, especially for developing countries. The causes of the price spike were complex and due to a combination of mutually reinforcing factors, including droughts in key grain-producing regions, rapidly rising oil prices and a continuing devaluation of the US dollar, the currency in which indicator prices for these commodities are typically quoted. This turmoil in commodity markets occurred against the backdrop of an unsettled global economy, which in turn appeared to have contributed to a substantial increase in speculative interest in agricultural futures markets. The oil price and energy prices more generally, are critically important contributing factor to the increase in production costs for agricultural commodities and food and ultimately in the market prices for these goods(Organization for Economic Cooperation and Development, 2008). Arnold (2003), defined inflation as the rise in the general prices of goods and services in an economy. It occurs as a result of money supply being higher than the rate of economic growth. When there is too much money in circulation chasing after the few available goods in the market. As a result the rise in demand causes an increase in price level of goods and services over a given period of time.

The underclass, are people who are at the bottom of a society having become victims of poverty trap. This class is largely composed of the young unemployed, long-unemployed, chronically sick, disabled old, or single-parent (usually the mother) families. Despite the rate of money supply being higher than the rate of economic growth, the wages earned by the underclass barely match the increase in prices. The poor households are hit hardest by the rise in the cost of living because the basic needs are not affordable with ease and as a result they are forced to change their consumption patterns by purchasing the essential commodities in small quantities or sometimes not purchasing at all. They have to forego essential items/ services because the increase in prices of commodities erodes their purchasing power and deepens their poverty level.

Also Piachaud (1978), said that inflation “acts neither as Robin Hood nor as Robber Baron: neither the poor nor the rich are affected in a uniform way‟‟ (p. 188). He pointed out that other things being equal, lower income groups may find it harder to cope with shifting prices because they have less capacity to switch their patterns of consumption in response.

Resolution Commission on Living Standards (2011), noted that the effect of global food prices on the cost of physical essentials in United Kingdom had two main consequences relevant to the distributional impact of inflation. The first one is that people on low incomes tend to consume more than average amount of such essentials as a proportion of their incomes thus they suffer more. Global inflation environment that puts pressure on key goods like food and fuel has serious long term consequences for the living standards of people on low and modest incomes. The second is that, the standard economic response of consumers to changing relative prices is to shift consumption away from things that have become expensive may not be an option, especially for the worst hit off.

According to Anthem Press (2010), the more recent inflation of United States financial markets had been due to large trade deficit in that country. This is so since the US currency is the reserve for most of the world and most international debt is dominated in dollars thus leading to an accumulation of dollar reserves in countries that had trade surpluses. The reserves ended up on Central banks that they used to buy 'safe' US assets like the US government bonds. Thus in the process, the foreign central banks contributed to financial inflation in US.

TOPIC: IMPACT OF INFLATION ON STANDARD OF LIVING IN NIGERIA

Format: MS Word

Chapters: 1 - 5
Delivery: Email

Number of Pages: 73

Price: 3000 NGN

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