Nigeria's inflation rate is 31 per cent – Johns Hopkins economist
The figure is more than twice as high as the official annual inflation rate for August as reported by the National Bureau of Statistics.
Nigeria's annual inflation rate for the 12 months ended August 31, 2020 as measured by Professor of Applied Economics at the Johns Hopkins University in the United States, Steve Hanke, was 31 per cent. That rate is more than twice as high as the official annual inflation rate for August as reported by the National Bureau of Statistics (NBS).
According to Nigeria's latest inflation report released by the NBS on September 15, the agency said the country's Consumer Price Index (CPI), which measures inflation, rose to 13.22 per cent year-on-year in August, compared to 12.82 per cent reported in July 2020. However, in his new monthly review, which he calls “Hanke’s Inflation Dashboard,” sent to Financial Nigeria, Prof. Hanke ranks Nigeria 9th out of 12 countries with the highest inflation rates in the world.
The top three countries on the list are Venezuela with an inflation rate of 1,347 per cent, Zimbabwe (706 per cent), and Lebanon (337 per cent). All the figures are for the 12 months ended August 31, 2020. Countries on the list are those with annual inflation rates exceeding 25 per cent as calculated by Hanke.
The economist said his annual inflation rates are measured based on a purchasing power parity (PPP) model he developed when he measured Zimbabwe’s 2007-08 episode of hyperinflation. Hanke said PPP represents the “gold standard” for measuring inflation for countries experiencing elevated inflation rates and/or hyperinflation.
The PPP-determined inflation rate model uses black market exchange rate data. His PPP concept also uses high‐frequency (daily) data available on the last day of the month. Official measurements, according to Hanke, are not made on the last day of the month. And as opposed to the CPI, which measures the average change in prices over a time period for a basket of goods and services; Hanke's model employs a more comprehensive, all-inclusive basket of goods, services and assets.
In addition to the differences in both the timing of his measurement and size of the inflation baskets, the purchasing-power methodology further differs from that used in official inflation measures. Whereas the official measures are calculated by determining the changes in prices of items (in local currency), in the official basket; Hanke’s model starts with changes in exchange rates to calculate changes in price levels. According to the economist, the most important price in an economy is the exchange rate between a country’s local currency and the world’s reserve currency, the U.S. dollar.
"Indeed, extensive testing has shown that at annual inflation rates exceeding 25 percent per year, the PPP method for measuring inflation is very accurate and reliable," Hanke wrote.
Hanke believes that where official data, like in Nigeria, are lower compared to his measurement, the countries are underreporting the inflation rate.
Other countries on Hanke’s Inflation Dashboard are Syria with inflation rate of 250 per cent, Sudan (201 per cent), Iran (111 per cent), Libya (54 per cent), Brazil (34 per cent), Turkmenistan (30 per cent), Argentina (28 per cent), and Turkey (27 per cent).
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