Company Amalgamation and Revaluation Method

TERMINOLOGIES ASSOCIATED WITH INFLATION
1. Inflationary gap: Inflationary gap refers to an economic situation in which the total demand in the economy exceeds the total supply of goods and services available to satisfy demand. Inflationary gap is calculated as the difference between the total amount of money available for spending and the total money value of goods and services available to meet the demand. The greater the inflationary gap, the greater the rate of inflation in the company and vice versa.


2. Inflationary spiral: Inflationary spiral is caused by an interaction of income factors, especially wages and prices, such that an increase in the price level causes workers to demand higher wages which cause the price level to still rise higher, thereby increasing the cost of production.
When prices rise, workers demand for higher wages, and so the wages increase. But this increases the cost of production, while prices increases again and the condition continues in the spiral manner.

3. Disinflation: It refers to a set of measures by which the inflationary pressure in an economy is removed so as to maintain the value of money. The essence of disinflation is to control inflation by direct control of consumer expenditure. this is done by reducing the supply of money and increasing the rates of interest, etc.





4. Reflation: It refers to an economic state of affairs in which prices, employment, output, etc are picking up a gain as a result of conscious government policy to that effect. When reflation has had too drastic effect on the economy, reflation is a period of recovery from the slump. While reflation is directed against deflation, disinflation is directed against inflation.

5. Stagflation: It refers to high rate on inflation which exists at the same time as industrial production is slowing down. It refers to high increases in the price level which are not accompanied by any increase in industrial production.

6. Slumpflation: It refers to an economic condition in which much reduced economic activity co-exists with inflation. In other words, it is marked by the idleness and under-utilization of resources such as capital and labour, at the same time as the general price level is rising and the value of money falling.

INFLATION IN  NIGERIA
Inflation has been a major problem facing Nigeria right from the period of civil war (Biafria War 1966-1970). Prior to this period, the Nigerian economy was in steady growth. This condition continued till the time of the first military intervention in 1966 when there was a deliberate policy of fiscal and monetary discipline. There was a balanced budget and there was no inflation.

Due to increase in government expenditure, budget deficit became acceptable to the government and inflation started to set in. By 1973, inflation had risen to about 6%. In that same year, the Nigerian Naira was devalued and the prices of imported commodities increased. In 1974, the Udoji salary award took the inflation figure from 13.8% that year to about 34% in 1975 due to increase in salaries and wages of workers.





However, there have been flunctuations in the level of inflation in Nigeria. For example, the inflation figure in 1982 was just about 7% but rose to 24% in 1983 and to 39% in 1984 and it became worse in 1986 when Second-tier Foreign Exchange Market (SFEM) was introduced. The inflationary figures stood at 40%. 

In any case, inflation has been controlled by successive governments but it has not yet been eliminated.