Inflation In Nigeria

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Inflation is the persistent increase in general price level. Inflation has become a leading topic of discussion in Nigeria families, press and government as its effects penetrate more deeply into nation’s life due to prevailing increase in prices. Depending on which side of an individual transaction, his welfare is affected by a change in one or more prices. Therefore, inflation must be well guided by the monetary authority of the country in order to raise the standard of living. The fact that increases in price level leads to a fall in the standard of living; unreliability of government policy is no more an issue of argument. The output of inflation can easily be assumed. Given constant set of prices today, the situation of chasing the same…show more content…
In addition, Central Banks need to understand the changing nature of inflationary processes in their respective countries in order to achieve and maintain low inflation. These include the type of shocks that cause inflationary impulses and the nature of propagation process. Also, the continuous poor performance of the Nigerian economy as captured by the growth rate of Gross Domestic Product (GDP) in the presence of high inflationary levels provides a key justification for this…show more content…
INTRODUCTION: Inflation is defined as a persistent and considerable rise in the general level of prices. This implies that, for rise in the price level to be termed as inflation, such a rise must be constant, enduring and sustained. This rise in price should have effect on almost every commodity and should not be transient. 2.2. INFLATION PROFILE IN NIGERIA Nigeria as a nation has been struggling with the challenge of price instability. This price instability level is hanging around a single digit and double digit as seen in figure 1 below. Figure 1: Inflationary trend in Nigeria (1970 to 2010) From the figure above, inflation in Nigeria was reduced effectively when single digit of 8.5% and 6.6% were recorded in 1997 and 1999 respectively. Inflation recorded the two digits in 2001, 2002, 2003 and 2004 when 18.9%, 13.2%, 14% and 15% were recorded respectively. Achieving price stability in Nigeria has remained one of the main objectives of monetary policy since the 1970s. Despite of this target by monetary authorities, a persistent increase in prices has created a major macroeconomic challenge. The rate inflation increased from a single digit level in 1960s to 16% in 1971 only to move to an all-high level of 34% in 1975. The 1975 high level of inflation has been accredited to the oil boom of the early 1970s. Several control measures put in place to control inflation in the late 1970s yielded a results with lower inflation recorded during the period. Nevertheless, high

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