Analysis of Inflation and Standard of Living in Nigeria

Abstract

Tijjani Muhammad, Adetunji Timilehin Temidayo and Babakura Bashir

Inflation is the persistent fall in the value of money for a given period, such that more money chases fewer goods and services, which influences the standard of living of people in Nigeria. This study investigates the impact of inflation on the standard of living in Nigeria for the period 1991 to 2021 using the Autoregressive Distributed Lag [ARDL] model. The empirical results showed a long-run and short-run relationship between GDPPC and the independent variables [CPI, INT & EXCH]. It indicated that past inflation was the important determinant that affected the people's standard of living in Nigeria. The result also discovered that Consumer Price Index [CPI] positively impacts Gross Domestic Product Per Capital in the short run [GDPPC]. In contrast, Interest Rate [INT] and Exchange Rate [EXCH] have a negative impact on Gross Domestic Product Per Capital [GDPPC] in the short run. The study recommended that government should improve and increase the production capacity in all sectors, encourage exportation in the country, and decrease the interest rate that will encourage investment in the country.

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