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Inflation and Macroeconomic Performance in Nigeria

Author

Listed:
  • Ekekwe, Mary Obiageli.

    (Department of Economics, Ignatius Ajuru University of Education, Rivers State, Nigeria.)

  • Njoku, Ndubuisi Felix

    (Department of Economics Michael Okpara University of Agriculture Umudike, Abia State, Nigeria.)

Abstract

In Nigeria, high inflation has been one of the major challenges facing the nation’s economy. This has necessitated the re-evaluation of the impact of inflation on the nation’s macroeconomic performance between 1981 and 2022. The data utilized were sourced from the secondary sources like Central Bank of Nigeria Statistical Bulletin 2022 and United Nations Conference on Trade and Development Report. The inflation rate, exchange rate, and interest rate served as independent variables, while per capita income and gross fixed capital formation (proxy for private investment) served as the dependent variables. The outcome of the unit root tests showed that all the variables were not stationarity at level, but became stationary after first difference which informed the use of Error Correction Model (ECM) test approach. The results from the per capita income model, revealed that an increase in inflation rate, exchange rate and interest rate erodes the value of the per capita income of the citizens. The result from the private investment model, showed that an increase in inflation rate, exchange rate, and interest rate reduces the level of private domestic investment. The policy implication of these results is that negative impact of inflation on these key macroeconomic indicators suggests that high or volatile inflation rates can hinder economic growth and development. The paper therefore recommends amongst others, that the central bank should adopt appropriate monetary policies aimed at controlling inflation rates within acceptable levels. This may involve adjusting interest rates, managing money supply, and employing other monetary tools to stabilize prices. Furthermore, government should prioritize fiscal discipline and prudent spending to avoid excessive budget deficits that can fuel inflationary pressures and allocate funds towards productive investments and infrastructure projects that stimulates economic growth without exacerbating inflation.

Suggested Citation

  • Ekekwe, Mary Obiageli. & Njoku, Ndubuisi Felix, 2024. "Inflation and Macroeconomic Performance in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(3s), pages 2186-2199, March.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:3s:p:2186-2199
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    References listed on IDEAS

    as
    1. Stephen Taiwo Onifade & Savaş Çevik & Savaş Erdoğan & Simplice Asongu & Festus Victor Bekun, 2020. "An empirical retrospect of the impacts of government expenditures on economic growth: new evidence from the Nigerian economy," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-13, December.
    2. Ezeibekwe, Obinna Franklin, 2020. "Monetary Policy and Domestic Investment in Nigeria: The Role of the Inflation Rate," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 34(1), pages 139-155.
    3. Khalid Ashraf Chisti & Khursheed Ali & Mohi-ud-din Sangmi, 2015. "Impact of Inflation on Per Capita Income in Emerging Economies: Evidence from BRICS Nations," Journal of Empirical Studies, Conscientia Beam, vol. 2(2), pages 34-39.
    4. Khalid Ashraf Chisti & Khursheed Ali & Mohi-ud-din Sangmi, 2015. "Impact of Inflation on Per Capita Income in Emerging Economies: Evidence from BRICS Nations," Journal of Empirical Studies, Conscientia Beam, vol. 2(2), pages 34-39.
    5. Nuwat Nookhwun & Rawipha Waiyawatjakorn, 2024. "Flexible Inflation Targeting and Macroeconomic Performance: Evidence from ASEAN," Asian Economic Policy Review, Japan Center for Economic Research, vol. 19(2), pages 198-219, July.
    6. Khalid Ashraf CHISTI & Khurseed ALI & Mohi-u-Din SANGMI, 2015. "Impact Of Inflation On Per Capita Income In Emerging Economies: Evidence From Brics Nations," Network Intelligence Studies, Romanian Foundation for Business Intelligence, Editorial Department, issue 6, pages 97-101, December.
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