Survey Highlights Likely Effects of Higher Inflation Rate on Economy

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Obinna Chima

Respondents to a survey conducted by the Central Bank of Nigeria (CBN) believe the economy would end up weaker if prices of goods and services begin to rise faster than they are presently.
The CBN stated this in its “Inflation Attitudes Survey Report,” for the first quarter (Q1) 2018, that was obtained on its website.

The survey was conducted from March 19 – 24, 2018, from a sample size of 2,070 Households that were randomly selected from 207 Enumeration Areas (EAs) across the country, with a response rate of 83.5percent.
According to the report, respondents were asked what would become of the Nigerian economy if prices started to rise faster than they do now.

But the result showed that 54.7 per cent of the respondents believed that the economy would end up weaker as 11.6 per cent stated that it would be stronger; 16.2 per cent of the respondents believed it would make a little difference, while 17.2 per cent stated that they did not know.

“The responses suggest considerable support for price stability, as majority (54.7 per cent) agreed that the economy will end up weaker. This is consistent with the notion that inflation is constrains economic growth.

“When asked how prices have changed over the past 12 months, respondents gave a median answer of 4.7 per cent.
“Of the total respondents, 16.2 per cent thought prices had gone down or not changed, 61.2 per cent felt that prices had risen least three per cent, while 16.9 per cent felt that prices inched up by more than oneper cent, but less than three per cent.

“Those that had no idea were 5.8 per cent. The median expectation of price changes over the next 12 months was that prices would inch up by 2.3 per cent,” it stated.
Furthermore, it showed that from the total responses, 41.1 per cent of the respondents expected prices to rise by at least three per cent over the next 12 months; 14.2 per cent expected prices to increase by more than oneper cent, but less than 3 per cent.

Similarly, 36.9 per cent of the respondents were optimistic that prices over the next 12 months would either go down or remain the same.

“The percentage of respondent households who felt that interest rates had risen in the last 12 months fell by 14.7 points to 31.6 points in the current quarter when compared to 56.3 points attained in Q4, 2017.
“On the other hand, 8.8 per cent of respondents believed that interest rates had fallen, 15.3 per cent of the respondents believed the rates stayed about the same in the last 12 months, while 44.3 per cent of the households had no idea.

“The result revealed that more households perceived that interest on bank loans and savings rose over the past 12 months.
“On the expected change in interest rates on bank loans and savings over the next 12 months, more respondents (26.9 per cent) were of the view that the rates will rise, while 17.5 per cent believed that the rates will fall.

“A net rise value of 9.4 per cent was recorded compared to 6.5 per cent attained in the previous quarter. About 59.6 percent of the respondents either expected no change or had no idea.
“Similarly, the respondents were asked whether it would be best for the Nigerian economy for interest rates to rise or fall,” it added.