The Impact of Inflation on Income Distribution in Nigeria. An Empirical Approach (1990–2023)

The study examined the impact of inflation on income in Nigeria for the period of 1990–2023. The study made use of four explanatory variables, which are: external remittance, interest rate, inflation rate, and exchange rate on income in Nigeria. The data were obtained from various issues of the Central Bank of Nigeria (CBN) Statistical Bulletin, journals, as well as financial indicators. Augmented Dickey-Fuller (ADF) and Johansen cointegration tests were employed to confirm the stationarity of the series and the long-run relationship among the series. The findings indicate that remittances positively impact economic growth and income distribution, supporting household consumption and investment. Higher interest rates increase the cost of borrowing, limiting access to credit, reducing investment, and negatively impacting income distribution. High inflation reduces household purchasing power, particularly affecting low-income earners, thereby worsening income distribution. The study therefore concluded that remittances play a crucial role in boosting real GDP and improving household welfare, emphasising the need for policies that facilitate their inflow. Conversely, high interest rates, inflation, and exchange-rate volatility negatively impact economic growth and exacerbate income inequality. The study therefore recommended that the Central Bank of Nigeria should implement policies to reduce transaction costs and encourage diaspora investments. The apex bank should also promote financial-sector reforms to lower borrowing costs and boost investment. The government should enhance domestic production to stabilise prices and reduce inflationary pressures.