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Managing Inflation in Nigeria: Challenges and Prospects

Anochie Uzoma C., Ude Damian Kalu and Opara Godstime I.

International Journal of Empirical Finance, 2015, vol. 4, issue 6, 372-386

Abstract: There appears to be a consensus that macroeconomic stability defined as low inflation is negatively related to economic growth. Hence, rapid output growth and low inflation are the most common objectives of macro-economic policy. Some scholars concur that inflation may also reduce a country’s international competitiveness, by making its exports relatively more expensive, thus impacting negatively on the balance of payment, in addition to reducing capital accumulation and productivity growth. This research work is to examine the reasons of inflation and economic growth in Nigeria showing how inflation can affect every sector in the economy, to identify the causes and examine the pattern of managing inflation in Nigeria. The secondary data was employed for this work. The ordinary least square (OLS) criterion was adopted in determining the relationship between the Dependent and independent variables, using the E-view, A two model equation were adopted in this research work. However the results from the regression model R2 adjusted is 0.950, which implies that 95.5% of the total variation of real Gross Domestic Product (GDP) can be attributed to the specified explanatory variables, while 0.5% is attributed to the variation of the independent variable, also the R2 is 0.69, which implies that 69% of the total variation of inflation rate can be attributed to the specified explanatory variables, while 31% is attributed to the independent variable. The R2 -adjusted is 0.694 which implies -86% variation in the inflation rate is caused by the variation of the explanatory variables. The study concludes that, government should include policies that will protect and cover every sector in the economy, this will stand as a yardstick for measuring performance of each sector, and inflation will also be checked alongside with performance. Firms may have to devote more resources to dealing with the effects of inflation also. The paper recommends that effective monetary and fiscal policies via efficient tax administration ought to be employed in order to stem this tide since inflation is caused by the excess money supply, some of the monetary and fiscal policy instrument will have little effect in controlling inflation.

Keywords: Inflation Money supply; Economy; Fiscal policy; economic growth. (search for similar items in EconPapers)
Date: 2015
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