Blog

Nigeria’s Little Problem: Lying Statistics

Nigeria’s currency (the naira) has been officially pegged in a range of 197-199 NGN/USD for nearly a year. But, that’s a phony government rate. As shown in the accompanying chart, the black market (read: free market) rate has exploded since October, and currently stands at 350 NGN/USD.

And that’s not all. Last week, the Central Bank of Nigeria reported an annual inflation rate of 9.62% for January 2016. The real annual inflation rate was over six times higher. Talk about lying statistics.
The most reliable method for calculating inflation in countries experiencing elevated rates of inflation is to utilize changes in the black market exchange rate data. Application of the Purchasing Power Parity theory (PPP) then allows us to calculate implied inflation rates. At high levels of inflation, this method is extraordinarily accurate. The real tale of Nigeria’s inflation problem is contained in the accompanying chart. Nigeria’s implied annual inflation rate exceeds 60%.

 
Past Blogs

Capital Controls: Hayek versus the IMF

February 16, 2016

With each financial crisis, politicians of all stripes go into overdrive. They busy themselves by ducking any examination of the policy blunders that created the crisis in the first place. A favorite tactic is to fan anti-market flames. Markets get a bum wrap, and a cascade of new laws and regulations ensue.

more »

Venezuela’s Bogus Inflation Statistics

February 16, 2016

n Thursday, Venezuela’s central bank released a long-overdue -- and little-trusted -- report claiming that the country’s inflation rate in 2015 was 180.9%. Unfortunately, for the global community, as high as this figure sounds, it is way below the true inflation rate.

more »

On Hyperinflation Hype

February 11, 2016

The Great Recession of 2008-09 brought with it quantitative easing. This, in turn, spawned a cottage industry of books, articles and blog posts about hyperinflation. The burgeoning literature contains a great deal of hype, which validates the 95% Rule: 95% of what is written about economics and finance is either wrong or irrelevant.

more »

Stop Bashing Banks, Please

February 11, 2016

Since the Great Recession, politicians have obsessed over bashing banks and bankers. According to Pols of all stripes, bankers caused the 2008-09 crash and ensuing slump. To make the world safe from banks, the “all-knowing” have given us Basel III, Dodd-Frank, and a plethora of banking regulations. This has, among other things, provided Bernie Sanders and his ilk with an open field.

more »

Annual inflation in Venezuela hits 615%

August 12, 2015

Professor Steve Hanke is director of the Troubled Currencies Project at the Cato Institute. Earlier this week, he told El Nuevo Herald, “The economy is in a death spiral, moving from a bad situation to a worse situation.”

more »