Future of Nigeria-A Case Study of Zimbabwe

Will history repeat itself in Nigeria? Only time will tell. This is going to be one of the most interesting articles you will ever read on the internet. I do hope this will help keep the Nigerian government on track in their policies so they don’t lose control of the economy.

Just before we dive into the rudiments of this article, I would like to explain the meaning of ‘inflation’ to readers who know little of economics. What is inflation?


Imagine you have 4 Nokia phones and you are willing to exchange all the 4 phones to get just 1 HTC phone. Let’s say this has been a normal practice everywhere. You want an HTC phone; all you need do is to bring 4 Nokia phones no matter the model. Since HTC phone has remained valuable, the owners of HTC phones now increase their requests to 8 Nokia phones just to get 1 HTC phone. Now you need more Nokia phones just to get the same number of HTC phone. What has changed?

Now replace the Nokia phones with ‘Currency’ and the HTC phone with ‘Goods and Services’. If the amount of currency in any economy increases without increasing the number of goods and services offered in the country, the value of the currency in the international market will fall. Hence,  too much money chasing over few goods. Most countries try to keep inflation rate at 2%.

During severe economic condition, there are two critical things the government may do;

1.       Increase tax paid by citizens or

2.       Print more money (if the economy is growing).

Nigerians are currently battling with high unemployment, rising food cost and falling currency value. These are all making it look like Nigerians are close to the end of the world. History sometimes repeat itself. But no sane person should ever go to jail for the same crime. Nigeria seems to be going in the path of Zimbabwe. A crate of egg cost about 10 billion Zimbabwean Dollars. Zimbabwean currency has suffered so much devaluation such that 175 quadrillion Zimbabwean dollar is now worth just $5(US). That is exactly what tourists now offer Zimbabwean people just to have a piece of their currency as a souvenir. Having realized that the currency has become so worthless worldwide, the government of Zimbabwe announced the move to adopt United States Dollar as its official currency since they lost control of the economy. How did it all start in Zimbabwe?

Zimbabwe enjoyed much economic boom in the post-independence days through export of agriculture produce and was one of the richest countries in Africa. There were many big farms owned by foreigners in Zimbabwe in the 80s. After Zimbabwe got its independence in 1980, President Robert Mugabe initiated a land reform policy as a boost to local content participation which saw that all lands including farms were taken from the foreigners in the country and returned to the indigenes of the country. Robert Mugabe also shared many of the farms amongst his friends and family members. Unfortunately, the new owners of these farmlands lacked the technical knowhow to manage the farms as this affected the export business hence dwindling revenue for the Zimbabwe government. In order to keep government projects running in the country, President Robert Mugabe decided to print more money due to falling revenue from agricultural exports. Following this, the USA, European Union and IMF sanctioned Zimbabwe and forced Zimbabweans working abroad to come back home. Their investments abroad were withdrawn and almost everyone had to come back home. No one wanted to do business with Zimbabwe.

President Robert Mugabe also decided during his time to start the Congo War II while he kept printing more money in order to buy ammunition and gave soldiers more support to sustain the war. This led to total collapse of the Zimbabwean economy at the end of the war. Unemployment in the county kept increasing and government printed more money to support unemployed people. Inexperienced farmers could not pay back their bank loans and finally caused the banking sector collapse. It should be re-called that Zimbabwe had no Central Bank then so government depended on commercial banks for funding of projects before the collapse. The government tried to put back the bank on track by printing more money. A cup of coffee was worth a trillion dollar. Prices were skyrocketing everywhere in Zimbabwe.

As food became scarcer but taxes remained at the same level, people were willing to pay more money for food and food became more expensive. More people were looking for food and less people looked for money as food is required to satisfy hunger. The indigenous Farmers could not even match the usual food production let alone increasing it. In any economy, as you print more money, the value of the currency decreases. Zimbabwe became a country with the largest debt in the world and continued to print more money in order to settle these debts. This led to hyper hyper hyper hyperinflation. Agriculture has always been the backbone of Zimbabwe’s economy until its collapse.

Lastly, in the struggle to help the economy; the Zimbabwean government placed restriction on foreign exchange which made it more difficult for people to have access to foreign currencies. This made it difficult to import goods or travel out of the country. As a result, foreign currencies were sought on the black market. While the black market provided a realistic exchange rate, the official bank exchange rate was significantly undervalued. While this continued for a while, it further resulted to exponential hyperinflation.

It should however be noted that Zimbabwe has adopted multiple currencies such as United States as Dollar, Pounds, etc  as official currencies and no longer facing inflation. Perhaps the problem looming in Zimbabwe at the moment will be deflation.

The story of Nigeria today may not be far from this unless adequate prevention and calculated risks are taken.

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