The Impact Of Inflation On Economic Growth In Nigeria

The Impact Of Inflation On Economic Growth In Nigeria

Abstract

The study seeks to present an empirical analysis of the impact of affectation on profitable growth in Nigeria, using periodic time- series dataset for the period 1979- 2008. It has been argued that affectation is an necessary miracle in the face of profitable growth. That’s why, over the times there had been a long standing conventional wisdom that affectation impedes profitable growth. The stationarity andco-integration ways were espoused to examine the data in order to determine if there exists a long- run relationship among the variables. Also, using OLS retrogression fashion, our empirical findings revealed an inverse significance relationship between affectation and profitable growth in Nigeria. These findings revealed an inverse significant relationship between affectation and profitable growth in Nigeria. These findings recommend among others, affectation targeting in controlling affectation in Nigeria.

Chapter One

Preface

Background Of The Study

Affectation has come a leading content of discussion in Nigerian families and other countries of the world. The press as its effect penetrates more deeply into the nation’s life. It has come commodity of a bromide to say that sharp, nonstop increase in price is among the serious profitable problems of our time. Indeed, the problem is so great that unless it’s brought under control, affectation will destroy the veritably fabric of our societies.

Affectation is generally used to describe a situation of high and sustained increase in the general price position of an frugality. It’s a social sickness as well as a pervasive profitable miracle. either, distorting prices, it erodes savings, discourages investment, stimulates capital flight, inhibits growth, and makes profitable planning a agony and political uneasiness( Guy, Debelle et al, 1998). Governments accordingly regard affectation as a pest and try to squelch it, by espousing sustained and harmonious financial and financial programs.

moment, we generally hear about different kinds of affectation. Indeed, the word affectation is frequently used synonymously with “ price increase ”. But there’s also a different, more specific description of affectation – a rise in the general price position caused by an imbalance between the volume of plutocrat and trade requirements. This “ affectation ” has but one origin, the central bank and one result – a less extensive plutocrat growth rate. But as a condition of the price position, which may have began from a variety of effects( including a cheapening bone , rising labor costs, bad rainfall, or a number of factors other than “ too important plutocrat ”), the result to- and the prudence of barring affectation is much less clear.

Affectation can have positive and negative impact on the profitable performance of an frugality. appreciatively, affectation can lead to a advanced sustained growth due to the effect it has on capital accumulation. Also, through its negative impact on productivity in an frugality, affectation results in adverse goods on profitable growth.

Some experimenters supported that, affectation can lead to query about the future profitability of investment design. Hence this lead to further conservative investment strategies than would else by the case, eventually leading to lower situations of investment and profitable growth. Khan( 2002), concurs that affectation may also reduce a country’s transnational competitiveness, by making its exports fairly more precious, therefore impacting negatively on the balance of payments. In addition, budget poverties also reduce both capital accumulation and productivity growth. On the negative, some propositions supported that there’s a positive relationship between affectation and profitable growth.

One ofmacro-economic pretensions in a society is profitable growth as defined by Kuznet( 1973) as a long term rise in the capacity to supply decreasingly different profitable pretensions to its population and this growing capacity is grounded on advanced technology, assiduity and the institutional and ideological adaptations, that’s demands. It thus, implies the increase in the value of goods and services produced by an frugality. profitable growth is accessibly measured as the chance rate of increase in real Gross Domestic Product and it’s generally calculated in real terms, i.e. affectation acclimated terms in order to net out the effect of affectation on price of goods and services produced.

Barro and Grilli( 1994), posit that, mainstream economists believe that high rates of affectation are caused by high rates of growth of the plutocrat force. They’re of the view that changes in affectation are occasionally attributed to oscillations in real demand for goods and services or in available inventories(i.e changes in failure), and occasionally to change in the force and demand for plutocrat.

In Nigeria, one of the major problem facing the frugality is affectation, the country registered low affectation in the times incontinently after independence. still, the country endured double number affectation rate in the 1970s. This was substantially as a result of civil war. Other period of high affectation was 1984, 1988, 1992 and 1995.

colorfulmacro-economic programs specially financial, financial and exchange rate had from time to time been espoused to address this problem of affectation. Unfortunately, these measures have met with little or no success and this has hindered the achievement of othermacro-economic objects similar as profitable growth, increase in employment, satisfactory balance of payments and indifferent income distribution.

It’s in this light that this study is devoted to identify the impact and the rate of affectation that’s respectable to achieve profitable growth in Nigeria in order to attain a more balanced profitable growth.

Statement Of The Problem

Since the attainment of independence of 1960, profitable programs have been concerned principally withanti-inflationary measures aimed at achieving price stability. Indeed, the financial policy frame espoused by Nigeria since 1993 has an overriding ideal and that’s the achievement of single number affectation( Essien and Eziocha 2002). Monetary and financial polices as well as pay envelope snap, price control, exchange rate and other measures have been employed from time to time to stem the drift of sustained increase in the general price position. In retrospection, it appears that inspite of these sweats; the achievement of price stability ideal has been limited.

Affectation undermines the part of plutocrat as a store of value. It also, frustrates investments and growth. Empirical studies( Ajayi and Ojo, 1981; Fisher 1993), on affectation, growth and productivity confirm the long- term inverse relationship between affectation and growth. The negative relationship between affectation and growth has been attributed to the strong negative association between affectation, capital accumulation and productivity growth. Accordingly, high affectation is said to be dangerous to both investment and hence, real affair.

Though utmost countries aim at keeping affectation low, it has been unpredictable in Nigeria in- malignancy of the harmonious trouble of the central bank of Nigeria through its financial policy that’s geared towards achieving a single- number affectation rate. For case, within the last thirty times( 1970- 2000), affectation rate has changed extensively. It assumed single- number only in seven times and double in twenty- three times reaching a peak of72.8 in 1994 from57.2 in 1993. Accordingly, some profitable judges( Adeyeye and Fakiyesi 1980, Osakwe 1993 and Asogu 1991), in recent time have sought explanation for this worrisome trend that has putatively been impeding profitable growth in the country.

Against this background, this policy is poised to probe and identify the extent of the effect of affectation on profitable growth with a view to proffering suggestion on ways for its control.

Ideal Of The Study

This study focuses attention on the effect of affectation on profitable growth in Nigeria over the times. The study has the posterior objects

1). To examine the effect of affectation on the profitable growth of Nigeria.

2). To find out whether affectation targeting would achieve a better profitable growth of Nigeria.

3). To probe the relationship between affectation and profitable growth in Nigeria.

4). To dissect the trend of affectation and profitable growth in the country over the times.

5). Suggest, on the base of the findings, policy recommendation for effective control of affectation in Nigeria.

Significance Of The Study

This study is of significance in three felicitations, videlicet;

1). It would help financial authorities to appreciate variables that impact on Nigeria affectation, with a view to managing similar variables meetly and effective;

2). The recommendations, grounded on the discoveries are anticipated to help the government in chancing a continuing result to the problem of affectation in Nigeria.

3). It would give companion and a reference material for other experimenters who might be interested in conducting exploration analogous or affiliated area of study.

Exploration Thesis

The thesis which arises from our exploration question shall be tested.

Ho There’s no significance relationship between affectation and

profitable growth in Nigeria.

Compass And Limitation Of The Study

This study covers a period of 30 times, that is, from 1979- 2008. It seeks to bandy propositions on affectation and profitable growth. In taking anover-view of affectation, the study will critically examine the effect of affectation on profitable growth.

More so, it’ll take an expansive review of the history of profitable growth and review empirical workshop on affectation and profitable growth using attained data from Nigeria.

still, this work, like any other work especially in the social lores, has its own limitation. In the first case, this study will be constrained by the quantum of applicable exploration accoutrements and data that are available to the experimenter at the time of conducting this study. More so, the deficit of sanctioned data, their trustability whenever available as well as the inconsistencies in the data published by different sources on the same item, all pose a serious challenge in the conduct of this study.

thus, in- malignancy of these constraints, attempt shall be made to insure that these draw tails don’t in anyway, significantly affect the findings of this study.