Being rich in resources doesn't mean you have a strong economy
Business
Nigeria inflation rises to more than 27-year high in December
LAHORE/ABUJA (Web Desk) – Being rich in natural resources or large size of a country or its population doesn’t mean your economy will also be strong. Similarly, absence of these assets also does not lead to a weak economy. Japan and South Korea are the prime examples. The former is the third-largest in the world and the latter is ranked 13th.
Similarly, the United Arab Emirates (UAE) and Qatar are tiny in size and population, but are global players in both on economic and political front.
At the same time, Saudi Arabia – another global actor which followed the path chosen by the UAE but at an unparalleled pace – is diversifying its economy – a shift from oil-based economy to the one which covers all subjects ranging from manufacturing to tourism, sports and entertainment.
So it is all about political will, goals and governance. Economy is run by the people, not abstract ideals and lifeless objects. It needs a Mohammed bin Salman to change the things, as his aim is much higher.
One the other hand, Pakistan too has a large population size and huge natural resources. However, it is currently facing the worst economic crisis of its history. No need to talk about what happened since 2017.
The oil-rich Nigeria is the largest nation in Africa in terms of population. It is also the largest economy in the continent. But many in the country do not have access to electricity – a basic requirement in today’s world.
Now, Reuters reported that Nigeria's inflation rate rose to its highest in more than 27 years in December as food prices surged, exacerbating a cost-of-living crisis and piling more pressure on the central bank to raise interest rates.
Consumer inflation rose for the 12th straight month in December to 28.92 per cent year on year from November's 28.20pc, the National Bureau of Statistics said on Monday.
Inflation in Africa's biggest economy and most populous nation has not climbed this high since mid-1996.
The food inflation rate, which accounts for the bulk of Nigeria's inflation basket, rose to 33.93pc in December from 32.84pc a month earlier.
The statistics office said prices rose for a broad range of food items including bread and cereals, oil, fish, meat, fruit and eggs.
Analysts say higher fuel prices and a weaker naira currency have also stoked price pressures.
David Omojomolo, Africa economist at Capital Economics, said "inflationary pressures are only likely to build from here," citing second-round effects from the removal of a fuel subsidy last year and naira weakness.
He predicted that inflation would breach 30pc by the end of the first quarter and said it was unlikely to peak until the middle of 2024.
President Bola Tinubu last May embarked on Nigeria's boldest reforms in decades by scrapping a costly but popular fuel subsidy and devaluing the currency to try to revive economic growth. But growth is yet to pick up while inflation has worsened.
Central Bank of Nigeria (CBN) Governor Olayemi Cardoso is yet to hold a rate-setting meeting since taking office in September.
"At the next meeting, we think that the CBN will need to raise rates by 400 basis points, to 22.75%, to show that it is taking the inflation fight more seriously," Capital Economics' Omojomolo said in a research note.
"There's a clear risk, though, the CBN underwhelms again. Doing so would undermine much of the momentum and optimism around the policy shift that President Tinubu started last year."
