Fiscal measures taken to contain inflation have included tax reduction or abolition to stimulate industrial production and import liberalisation to increase the domestic supply of goods in the economy. As these efforts failed to yield any significant result on supply, trade controls and tariffs were reimposed in 1977 because of lean government financial resources.
Operation Feed the Nation (OFN), the National Accelerated Food Production Programme, direct food importation by the National Supply Company and the Price Control Board, which was recently abolished, were unsuccessful efforts made to bring food prices down. An anti-inflation task force was set up in 1975 and its findings led to the setting up of the productivity, Prices and Incomes Board. This Board was to provide guidelines for income, price and wage increases in the economy. Not much positive result has been achieved from the efforts of the Board. Wage freeze in the economy before and after the Udoji Award has also had little or no impact on inflation.
The monetary policy was initially geared towards easy money through credit regulation and credit priority to sectors, which will decrease supply bottlenecks. In the last three years the Central Bank has switched to a tight monetary policy because of persistently rising inflation and excess liquidity in the economy. The impact of monetary policy on inflation in the economy has not been significant because of the relative
underdevelopment of the monetary and financial sectors of the economy.
It is pertinent to note here that the lack of policy coordination between the actions of the Finance Ministry and the Central Bank has further compounded the inflationary situation. For example, while the Central Bank has been trying to tighten credit in the economy, the government has encouraged fiscally-induced monetary expansion through its rising budgetary activities. For instance, budget deficits nearly doubled between 1975 and 1977 rising from N1.8 billion. The impact of this on domestic inflation in an economy with limited absorptive capacity cannot be overemphasised.
The inflation problem in Nigeria needs rather drastic measures if any serious impact is to be made in correcting the situation. If the present trend continues unabated it may generate social and political tensions, which would be harmful to the future development of the economy. Real resources wasted by frivolous government expenditure must be stopped and government's fiscal activities should be governed by the absorptive capacity of the economy. The inflationary problem can be linked with the oil and food problems. A successful resolution of these two pressing problems would greatly enhance the effort to find a lasting solution to the problem of inflation in the economy.
4.0 CONCLUSION
The persistent rise of the general price level of the country is yet to be tackled. Besides, government fiscal and monetary policy measures have failed to address this problem. The inflationary pressures keep mounting as the price of goods and service do move upward. This has been primarily as result of excess domestic liquidity and continuous imported inflation. Lack of policy coordination between the action of the finance ministry and the central bank has further compounded the inflationary situation. Thus, while the central bank has been trying to tighten credit in the economy the government has encouraged fiscally induced monetary expansion through its rising budgetary activities.
5.0 SUMMARY
The persistent and appreciable rise in the general level of price could be seen as inflation. The inflationary phenomenon could be identified as demand-pull, the cost-push, and the mark-up and structural types. There is this general consensus that inflation affects production of goods and service, income of different groups of people, balance of payments of the country, the currency of a country and it brings about distortion in the economy and a were of industrial discontent.
However, the government of Nigerian has made considerable efforts to curtail inflationary pressures. These concerted efforts could be observed with the fiscal and monetary policy measures yet to generate enough absorption capacity that places the economy within an economic growth and development that is inflationary free.
6.0 TUTOR-MARKED ASSIGNMENT
Efforts are being made by developing countries to curb structural inflationary situation because of its economic distortion effect. With reference to Nigeria, discuss the various efforts made by the federal government.
7.0 REFERENCES/FURTHER READING
Anyanwu, J.C., Oyefusi, A., Oaikhenan, H.O., Dimowo, F.A. (nd).
Structure of the Nigerian Economy (1960-1997). Joanee Education Publisher Ltd.
Molem C.S.(nd). Growth and Development of Nigerian Economy.
Kaduna: Silver Bond Publisher.
Tayo Lambo (1982). Nigerian Economy: A Text of Applied Economics.
Evans Brothers Nigeria Limited.