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Is it the case that
the often contentious debate over the direction of domestic prices in
the country,especially the more bothersome questions concerning the
integrity (and reliability) of official data, arise on the back of a
basic confusion? When, as it has been the case for some time now, I
cannot buy today with the same amount of money, the same quantity of
bread that I bought last year, there is a major problem.

Clearly, I am worse
off materially. And even more so, when, as it were, I happen to subsist
at the margin of one of the world’s more poorly run economies. In
response, I could do either of two things: increase my income to
compensate for the adverse movement in prices; or reduce my expenses.
The former option presumes that opportunities abound in my economic
space to find new ways of augmenting my income, either through putting
in more hours in my current employment, or by moving up the job skills
ladder.

Although, in truth,
a much different option, especially in jurisdictions where the
determined may play fast and loose with the criminal justice system,
would be to seek new income sources at the very edge of the law.
However, more likely than not, in an economy such as ours, where the
opportunities for both legal, and illegal augmentation of the take-home
pay have all but evaporated, the only options available to me are
either to eat less bread than I am minded to. In which case I also hope
to bear through other means the health consequences of a much-reduced
nutrient intake on members of my family. Or to buy cheaper
alternatives. This latter option, in truth, makes as much demand on my
family’s adjusted quality of life.

When inflation
statistics excite in Nigeria, it is invariably because of the extent to
which this sense of the price movement impinges on the choices we have
made, are making, or will make. Besides the more obvious consequences
from a fall in the real value of money, uncertainty over the future
direction of prices could force businesses to put off investment in new
productive activity, and massively restock inventory. Consumers mimic
the latter process when they likewise resort to hoarding as a hedge
against anticipated price movements. Okay, because one needs money to
invest in higher levels of inventory, and the average Nigerian is not
presently so endowed, this might not be an immediate worry. But the net
effect of our concerns over inflation is concerns the way that it leads
to a reduction in overall economic productivity.

When the inflation
figures gall, however, it is because official statistics appear to run
in the teeth of the anecdotal. Last week for instance, nearly all the
papers reported that (the) inflation (rate) for June 2010, at 10.3% was
down on the rate for May 2010. The main challenge with reading meaning
into data of this sort, is how to square them with the known fact that
between May and June this year, prices have moved sufficiently across
certain goods and services to such a degree as to have further
imperilled the existence of certain demographic groups in the country.

Yet, this conflict
is not as irreconcilable as it seems. It apparently arises from the
fact that, on one hand, official number crunchers are looking at the
annualised percentage change,

over time, in the
National Bureau of Statistics’ (NBS) general price index. While on the
other hand, as consumers we feel the loss in the purchasing power of
our disposable income because of the erosion in the real value of the
naira. For evidence, look no further than the NBS’ data on inflation
for last month.

The All Items Index for June 2010 stood at 225.8, as against 204.7
in June 2009. In this sense, the index confirms our experience: prices
are up. But June-on-June, inflation rose by 10.3 per cent. We may
disagree with this rate, only because the composition of our daily
spend is not represented by the basket of commodities (and the weights
attached to them) in the NBS’ index. But when the inflation rate is
reported to have dropped, all that is said is that inflation
(year-on-year) is not growing as fast as it was last month, and not
that absolute prices are falling.