Inflation​ ​not​ ​Recession,​ ​Recession​ ​not​ ​Inflation (Pt 1)

Both inflation and recession are now very popular terms among Nigerians, because these are the present economic problems facing the country and like every macroeconomic issue it affects everyone both rich and poor, young and old. Lots of Nigeria have misconceived this two economic concepts, even though we are presently experiencing both in Nigeria, these two are distinct economic phenomena, both have different policy implications and policy instruments to be geared towards them are different.

INFLATION by economic theory is the persistent rise in general price level, the general price level refers to the average of prices of all commodity at a particular time. This means that increase in the price of one commodity does not necessarily mean inflation has occurred, for inflation to occur by increase in price of one commodity that commodity must be on a very demand in the market, that is why fluctuations in prices PMS often lead to fluctuations in average price level in Nigeria.

Nigeria’s inflation rate has been on the increase since last year, increasing month by month and now at 17.6% according to NBS. Having inflation close to 20% is not very good, by economic theory double figured inflation like 20 per cent are termed galloping inflation, presently every week you get to the market and you cannot buy most goods the price you bought them the previous week, so imagine how difficult it might be if inflation in Nigeria, gets to that rate.

ECONOMIC RECESSION is a term from BUSINESS OR ECONOMIC CYCLE, a business or economic cycle refers to short run fluctuations to aggregate economic activities, economic cycle is often called business cycle (is majorly a stock market term), because stock market prices tend to rise or fall in anticipation of economic changes (GDP). This means economic cycle refers to shocks to aggregate economic activities, which is measured by gross domestic products in most countries. Phases of economic cycle include PEAK, RECESSION or CONTRACTION, TROUGH and RECOVERY or EXPANSION periods.

Read Part 2 here