The Determinants Of Inflation In Nigeria

The Determinants Of Inflation In Nigeria

Abstract

Affectation is one of the macroeconomic problems facing numerous developing countries moment and Nigeria isn’t exempted. Inspite of the use of financial and financial policy measure. For controlling affectation in Nigeria, affectation still remain a serious and contentious problem in Nigeria. The major purpose of the study is to punctuate the determinants of affectation in Nigeria and to check the trend of affectation overtime and the measures to check it.

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The data were largely the secondary type and the main sources is the CBN statistical bulletin for the period of 1980 – 2009. The methodology involves the use of classical direct retrogression model usingE-views econometric package. These include R2 and acclimated R2 to test the explicatory power of the estimates, t- test to determine the significance of the entire retrogression plan and the alternate order tests which includes test for bus- correlation, test for stationary, Normalcy test. The retrogression result shows that Government expenditure have a positive impact on affectation while real exchange rate, real GDP and plutocrat force have a negative impact on affectation independently. This implies that an increase in plutocrat force, real GDP and real exchange rate will reduce affectation while an increase on government expenditure will increase affectation. The experimenter advices that financial and financial programs should be used to control and direct profitable conditioning of a country to avoid affectation.

Chapter One

Preface

Background Of The Study

The avoidance of rapid-fire increase in price which in turn leads to affectation is one of the macroeconomic objects of any frugality. Affectation as the name implies can be described as a sustained rise in prices( Johnson), a continuing increase in the general price position( Brooman), a patient and perceptible rise in the general position of prices( Shapiro) and a continuing rise in prices as measured by an indicator similar as the consumer price indicator( CPI)( Dernbery and Mc Dongall).

RobertJ. Gordon describes three major types of affectation as the “ triangle model ’’ and these includes demand- pull affectation, cost- drive affectation and erected- in affectation.

Demand- pull affectation according to him is caused by an increase in aggregate demand due to increased private and government spending.

Cost- drive affectation also known as Supply shock affectation is caused by a drop in aggregate force as a result of natural disasters or increased prices of inputs.

erected- in affectation is convinced by adaptive prospects and involves workers trying to keep their stipend up with prices and enterprises passing these advanced labour costs onto their client as advanced prices, leading to a vicious circle ”.

The presence of affectation in an frugality leads to a fall in the function of plutocrat as a medium of exchange and a store of value.

Affectation started in Nigeria after the 2nd world war. The central bank of Nigeria being part of the macroeconomic operation indulges in chancing out the determinants of affectation in the frugality and sets up the needed macroeconomic programs that will help to reduce the inflationary rate in the frugality.

Affectation can be the form of running affectation which is a situation whereby inflationary rate becomes illimitable and willful ( that’s the rise in price is from 20 to 100 percent per annum or further) it’s also known as hyperactive/ runway affectation.

The Nigeria frugality is passing a situation of stagflation( that is the presence of severance coupled with high rate of affectation)

Several propositions have been suggested by economists to describe the nature and causes of affectation and one of similar propositions is the demand pull proposition which is the rise in aggregate demand and lower force of goods( that is too important plutocrat chasing smaller goods).

Affectation in Nigeria have really affected one of the factors of product land to be precise by its nonstop price increase and demand by the comprador bourgeois who use it for their colorful investments.

still, affectation is described as a patient rise in the general price position and it’s the dependent variable in this course of study.

Statement Of The Problem

Affectation has a negative impact in the frugality as awhole.However, it leads to a fall in the standard of living and profitable development of a nation, If it isn’t backed up with an proliferation in the stipend and hires of workers.

High or changeable affectation rates are regarded as being dangerous to the over each frugality. They add scarcities in the request and make it delicate for compaines to budget or plan long- term. query about the unborn purchasing power of plutocrat discourages investment and saving.

Developing nations have been crippled in the aspect of carrying advanced rate of capital conformation due to severe and prolonged affectation.

In Nigeria, some of the macroeconomic variables determining affectation are said to be real GDP exchange rate, government expenditures and plutocrat force.

This study looks into these determinants of affectation and tries to give applicable macroeconomic programs that will lead to its reduction.

Ideal Of The Study

The objects of this study are;

1. To determine the possible determinants of affectation rate in the country.

2. To give possible profitable programs and results to the issue of affectation in Nigeria.

Exploration Thesis

This thesis is formulated to acquire necessary information and introductory supposition to the study

H0 There’s no significant relationship between affectation rate and plutocrat

force, exchange rate, real Gross Domestic product and Government expenditure leading to a negative impact on affectation in Nigeria.

H0 K0 = 0

H1 There’s significant relationship between affectation rate and plutocrat

force, exchange rate, real Gross domestic product and Government expenditure leading to a positive impact on affectation in Nigeria.

H1 K1 ≠ 0

Significance Of The Study

This study piecemeal from its set objects will be important in the following ways-

1) It’ll help policy makers in their zeal to establish policy measures for handling the issue of affectation in Nigeria.

2) It’ll advance the knowledge of druggies on affectation.

3) It’ll serve as a guideline for farther exploration work on this particular

content.

Compass And Limitations Of The Study

This exploration work is from the period of 1980 to 2009 and is being limited by finance and time. Notwitstanding its limitations, it’s assumed that it’ll serve the purpose for which it’s carried out.