Increasing Inflation Worsens Nigeria’s Misery Index

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The continuous increase in the consumer price index (CPI), which is used to measure inflation in Nigeria, has worsened the misery index of the nation.

Misery index is a measure of economic well-being for a specified economy, computed by taking the sum of the unemployment rate and the inflation rate for a given period.

An increasing index means a worsening economic climate for the economy, and vice versa.

Simply put, misery index is the sum of inflation plus unemployment rate; the higher the combined score, the worse the economic situation.

Using the Q3 2016 unemployment of 13.9 percent and December’s inflation of 18.55 percent, Nigeria’s misery index is 32.45.

Nigeria Misery Index for Q1 –Q3 2016

Quarters              Inflation rate      Unemployment rate      Misery Index

Q1                          12.77                     12.1                                        24.87

Q2                          16.48                     13.3                                        29.78

Q3                          17.85                     13.9                                        31.75

Q4                          18.55

Data sources: NBS

Nigeria’s misery index had risen for the last three quarters, if this movement persists, consumers would be hit hard.

Consumer may face deeper dwindling purchasing power, as their incomes would only be able to buy less of their usual consumption basket.

Similarly, the poor will become poorer in real terms, and the middle class will thin out.

Increasing misery index implies declining economic activity and reduced consumption.

This is because unemployed people are underutilized and rising prices will discourage rational consumers from spending.

This can cause or complicate an economic slowdown or contraction.

There will also be increased debt, as the government borrows money to increase social support schemes. In the end, the citizens will be left with high uncertainty and low morale.

http://afslnigeria.com/2017/02/01/increasing-inflation-worsens-nigerias-misery-index/

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