According to a John Hopkins University professor in applied economics, Steve Hanke, for 12 months up to August 2020, the rate of inflation in Nigeria was 31%. As reported by the National Bureau of Statistics, this rate is two times higher than the official annual inflation rate of the country for August.
According to reports released by the NBH in September 2020, with regards to Nigeria’s recent inflation rate, the nation’s Consumer Price Index which is an instrument for measuring inflation, indicated that there was a 13.22% increase in the rate of inflation on a year-on-year basis in August as opposed to the records reported for the month of July which was 12.82%. However, Hanke’s Inflation Dashboard, which is a monthly review on inflation sent to Nigeria, indicates that Nigeria ranked the 9th out of 12 nations, among the highest rates of inflation globally.
Zimbabwe has 706% at the 2nd position, Venezuela ranked 1st with a 1,347% inflation rate, and Lebanon came in 3rd, with its inflation rate at 337%. These numbers were all from 12 months till the end of August 2020. Hanke calculated mostly countries that had rates of inflation which exceeded 25%. This is a major disadvantage for people who use the Forex grid strategy at the moment because it’s unknown how automated FX trading software is going to respond to such a sharp uptick in inflation rates.
The professor said that these yearly inflation rates calculated by him are based on the model of purchasing power parity which he developed when measuring the 2007/2008 occurrences of hyperinflation in Zimbabwe. He said that the PPP model represented sort of a “gold standard” in the measurement of the rates of inflation in countries that are suffering from high rates of hyperinflation and/or inflation.
The inflation rate determined by the PPP model uses information from the exchange rates in black markets. This concept also makes use of the daily high-frequency information which is accessible at the end of the month. As per Hanke, official measurements are not only created at the, as opposed to the measurement done by the CPI, which calculates the average price changes over a period of time for products and services. The model created by Hanke uses a more extensive model and includes all services and assets and all basket products.
Notwithstanding the distinctions in both the circumstance of his estimation and size of the inflation rates, the buying power technique is further different from that utilized in official rates of inflation. While the official measures are determined by deciding the price changes of products in the local currency, in the official rates of inflation in a given sector; Hanke’s method begins with changes in exchange rates while calculating the adjustments in the prices. As indicated by the financial analyst, the most significant cost in an economy is the conversion scale between a nation’s local currency and the USD, which is the world’s reserve currency.
Hanke confirmed that through comprehensive testing, the annual inflation rate surpasses 25% each year and that the PPP model for inflation measurement is more reliable and accurate than the CPI model.
According to Hanke, where there is official information like in the case of Nigeria shows that inflation rates are lower, the nations are underestimating the rate of inflation.
On Hanke’s Dashboard, there are other countries such as Syria, with 250% rates of inflation, Iran 111%, Sudan 201%, Brazil 34%, Libya 54% inflation rate, Argentina with 28%, Turkmenistan with 30%, and Turkey with 27% inflation rate.
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