Nigeria’s Standard of Living in the Face of Inflation

Abstract

Inflation in Nigeria has been the major problem causing a lower standard of living for people as it erodes the purchasing power of people. As such, studies have been conducted but with different findings. Furthermore, theoretically and practically, Nigeria experiences economic and social instability owing to the fact that it consumes more than it produces, and imports most of the raw materials for the little production it makes. This has however made the cost of living high. Hence, this study examines the impact of the inflation rate on the standard of living of people in Nigeria, collecting data that span from 1999 to 2022. To estimate the parameters of the model, the Autoregressive Distributed Lag Model was employed. From the long-run result, Manufacturing Capacity Utilization (MCU) and exchange rate (EXCR) have a negative impact on the standard of living, while the Consumer Price Index (CPI) and unemployment rate (UNEM) have a positive impact. The short-run impact shows that CPI, MCU and UNEM have a positive impact, while EXCR has a negative impact. As a result of these findings, the study recommends that the government should put measures in place to reduce the rate of inflation, even though it has a positive impact on this study. This can be done by encouraging investments in the manufacturing sector. This will equally increase the manufacturing capacity utilization, and reduce the unemployment rate, thus, increasing the standard of living of people.