INFLATION AND STANDARD OF LIVING IN NIGERIA

Abstract

The standard of living of Nigeria's citizens has been deeply affected by inflation, which has been a persistent challenge. Hence, this study empirically determined the effect of inflation on standard of living in Nigeria from 1985 to 2023. The consumer price index and commodity price index were employed as proxies of inflation in the study. Conversely, the control variable was interest rate, while standard of living was measured by Gross Domestic Product Per Capita. The study primarily utilized annual time series data, which were obtained from the Central Bank of Nigeria (CBN) statistical bulletin and National Bureau of Statistics (NBS) reports. The analytic techniques employed were the Augmented Dickey-Fuller (ADF) approach of unit root test, the Autoregressive Distributive Lag (ARDL) bounds co-integration test, and the ARDL approach. The ARDL model estimation result indicated that the consumer price index and commodity price index have a negative and significant effect on Gross Domestic Product Per Capita in both the short-term and the long-term. Conversely, the interest rate has a non-significant negative effect on GDP Per Capita in both the short-term and the long-term. The study's conclusion was that inflation substantially diminishes the standard of living in Nigeria. This study recommended that government should implement a comprehensive price stabilization policy to control inflationary pressures generated by the consumer price index, among other things. This can be accomplished by implementing targeted fiscal measures, such as supply chain logistics improvements to reduce transportation costs or subsidies for essential commodities (e.g., food and energy).