Determinants of inflation in Nigeria: a co-integration approach

Impact of imports and exports on inflation and how to encourage inflation-reducing factors in Nigeria

This study examines the factors affecting inflation in Nigeria, where continuous increases in prices are among the most serious economic problem in the country. Considering the urban, rural and combined consumer price index in Nigeria, the paper shows that all components of price index rose at generally higher rate than previous years. However, the author argues that inflation in Nigeria can be curtailed if factors that increase it are dealt with.

The study finds that:

the previous total export is to have a negative impact on current inflation
particularly, lagged crude oil export has notable negative impact on inflation
on contrary, the previous total import is to exert a positive effect on inflation rates
lagged interest rate is to reduce inflation rates

The paper concludes the factors that reduce inflation should be encouraged as this might lead to price stability or price reduction in Nigeria. Furthermore, the following policy measures are recommended:

policies that will set the interest rate to a level at which it will encourage investment and increase in production level could be institutionalised
importation must be reduced by probably encouraging consumption of locally made items
exchange rate system should be maintained at a level that will not impose threat on the Nigeria economy, not too high nor too low
domestic consumption of petroleum product should be focused, not only exportation that has the tendency of depleting oil levels

Related content

Document
The political economy of social protection policy uptake in Nigeria
Partnership for African Social and Governance Research, 2015
None of the recent efforts to study social protection in Nigeria have provided a detailed description of the political economy factors that enhance and prevent the uptake of social protection policies.
Document
Illicit financial flows estimating trade mispricing and trade-based money laundering for five African countries
K. Nicolaou-Manias, Y. Wu / Global Economic Governance Africa, 2016
Illicit financial flows (IFFs) are garnered through the proceeds of illicit trade, trade mispricing, transfer pricing and other forms of organised profit-motivated crime.
Document
The Funded Pension Scheme and economic growth in Nigeria
A. Farayibi / Munich Personal RePEc Archive, 2016
In Nigeria however, life after retirement is dreaded by most workers. The fears of facing the future after retirement create an ambiance of disturbance among employees. Retirement is seen by workers as a transition that could lead to psychological, physiological and economic problems.
Document
Micro-credit as a strategy for poverty alleviation among women entrepreneurs in Nasarawa State, Nigeria
A. J. Idris, K. C. Agbim / 2015
All over the world, poor people are routinely excluded from the formal finance system, ranging from full exclusion in developing countries, to partial exclusion even in developed countries. This fact contributes to making poverty a major development challenge, with one often touted solution being that of providing access to micro-loans.
Document
Prospects for economic growth in Nigeria: a demographic perspective
Program on the Global Demography of Aging at Harvard University, 2015
Nigeria’s political and economic prominence within Africa, along with the country’s position on the threshold of a major demographic transition, raises three related questions: (1) What is the potential for economic growth created by Nigeria’s demographic transition?

Eldis

Determinants of inflation in Nigeria: a co-integration approach