Impact of Inflation Rate on the Economic Growth in Nigeria

Abstract

The study examined the impact of inflation rate on the economic growth in Nigeria. The study explored secondary data for the period of 1960 to 2012 and used E-view 7.2 statistical window in processing and analyzing the time series data. The empirical result of the test showed that for the periods, 1960-2012, there was no co-integrating relationship between Inflation and economic growth for Nigeria data. Furthermore, we examined the causality relationship that exists between the two variables by employing the Pairwise-Granger causality at two lag periods. The paper however recommended that the government should ensure that policy measure (or monetary or fiscal) to control inflation rate has to be put place-through the efforts of Central Bank of Nigeria, maintain inflation rate at single-digit level,  high premium of control on money supply since it has a significant link with inflation in the economy-such as Nigeria, should formulate and implement policy on inflation rate since it inversely affects market capitalization in Nigeria, and create atmosphere that encourages the general public to save that part of cash that is not consumed immediately or idle cash, saving leads to capital accumulation or rather capital formation will be low. This will discourage potential investors to invest since no source of investible funds.