An analysis of the determinants of inflation in nigeria

Thesis Abstract

Abstract
This study investigates the determinants of inflation in Nigeria. Inflation is a significant macroeconomic indicator that affects the overall economy, including consumption patterns, investment decisions, and policy-making. The study employs a time series analysis covering the period from 2000 to 2020 using quarterly data. Various determinants of inflation are examined, including money supply, exchange rate, GDP growth, and government spending. The findings suggest that money supply, exchange rate, and government spending have a significant impact on inflation in Nigeria. An increase in money supply leads to higher inflation rates, indicating the presence of a monetary inflation spiral. Likewise, a depreciation of the exchange rate contributes to higher inflation by increasing the cost of imports. Government spending also affects inflation, as excessive spending can result in increased aggregate demand, leading to inflationary pressures. Furthermore, the study finds that GDP growth has a mixed impact on inflation. While higher economic growth can lead to increased demand and inflation, it can also improve productivity and lower inflation in the long run. This suggests that policymakers need to strike a balance between promoting economic growth and controlling inflation. The study also explores the role of external factors, such as global oil prices and international capital flows, in influencing inflation in Nigeria. Given the country's heavy reliance on oil exports, fluctuations in global oil prices can have a significant impact on domestic inflation dynamics. Similarly, capital flows can affect inflation through their impact on the exchange rate and money supply. Overall, the study provides valuable insights into the determinants of inflation in Nigeria and highlights the importance of sound monetary and fiscal policies in controlling inflation. The findings suggest that policymakers need to focus on maintaining price stability while promoting sustainable economic growth. Moreover, the study underscores the need for a holistic approach that takes into account both domestic and external factors in analyzing inflation dynamics in Nigeria.