May 23, 2016 10:35AM 

# Nigeria’s Growing Economic Troubles 

By [Steve H. Hanke](https://www.cato.org/people/steve-h-hanke) 

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On May 20th, the [Financial Times](http://www.ft.com/fastft/2016/05/20/nigeria-suffers-shock-q1-contraction/?ft_site=falcon&desktop=true) reported the surprising contraction recorded in Nigeria’s economy. The first negative year-over-year quarter for GDP in six years. This will be the start of more negative news from Nigeria.

Without a major currency reform (read: the installation of a currency board), the weakness of Nigeria’s naira will not end anytime soon. This is bad news for inflation, which, according to my [Cato Troubled Currencies Project](https://www.cato.org/research/troubled-currencies-project) estimate, has exploded to an annual rate of 58.6 percent. This is a long way from the official estimate (see the chart below).

![Media Name: chart_1_nigeria.png](/sites/cato.org/files/styles/pubs_2x/public/wp-content/uploads/chart_1_nigeria.png?itok=jC96md6k) 

This large discrepancy between the most recent official annual inflation rate of 12.77 percent and my implied inflation rate of 58.6 percent [calls again for the use of a lie coefficient](https://www.cato.org/blog/venezuelas-lying-statistics). The formula for utilizing this lie coefficient is as follows: (official data) × (lie coefficient) = real estimate. At present, the Central Bank of Nigeria’s lie coefficient is 4.6.

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