Is the Inflation Problem in Nigeria Unsolvabl...

Is the Inflation Problem in Nigeria Unsolvable?

Author Name : Joel Isaac Okon, Nsikak Jonah Joshua, Nnaemeka Peter Arinze, Ubong Edem Effiong

ABSTRACT

This study examined the determinants of inflation in Nigeria using annual time series data from 1981-2018. The study found that interest rate, government expenditure, money supply and real GDP are all positively related to inflation. Exchange rate however had a negative relationship with inflation. It was also established that there exists a unidirectional causality between inflation/interest rate and real GDP. It is pertinent for monetary authorities to effectively manage interest rate by keeping interest rate at a level that will help in maintaining recommended level of inflation which is necessary for economic growth and development. Also it is necessary for the government of Nigeria to diversify the economy from the mono-economy by establishing industries, stimulate the productive capacity of the economy especially the agricultural sector to increase food production, encourage exportation and discourage importation which will help in strengthening and promoting our local currency to appreciate in value and reduce imported inflation.

Keywords: Inflation; Interest Rate; Monetary Policy; Nigeria.