Inflation targeting is a monetary policy regime that involves five main elements. Nigeria, hence the need for a greater attention to it. The central bank of nigeria cbn employs the monetary targeting framework in the conduct of its monetary policy. In other words, inflation targeting does not only mean communication to the public of numerical values of inflation for the next year. Use the free adobe acrobat reader to view this pdf file. The pickup was mainly driven by faster growth of food prices.
Nigeria started experiencing budget deficit in her budgetary system since 1957 and became persistent in the 1970s prior to the civil war of 1967 to 1970, and up till date, nigeria only has seven years of journal of emerging tre nds in economics and management sciences jetem s. Given the major distortions caused by it in the economic growth of the country and the living standard of the citizenry, various administrations in nigeria in the past and present had adopted various measures to deal with inflation in the country without achieving the desired goal. Pdf inflation targeting monetary policy rule in nigeria. Why nigerias startups are the answer its healthcare system has been waiting for healthfocused startups have become highprofile players in nigeria after identifying gaps in the market, reflecting the positive future of healthtech companies across the continent. Generally, inflation targeting is a policy in which an estimated inflation target is made public and deliberately pursued using the instruments of monetary management such as interest rate to steer actual inflation towards the desired policy target. Inflation become significant in nigeria after the nigeria civil war thought it might have been in existence long before then. Under the monetary targeting framework in an indirect approach, the liquidity level that is consistent with macroeconomic objectives is determined using. The study was conducted to evaluate the impact of inflation on economic growth in the context of an emerging market using empirical evidence from nigeria. In nigeria, monetary policy has been in use since the central bank of nigeria was saddled.
The study finds that all of the targeting countries examined have maintained low rates of inflation and increased the transparency of monetary policymaking without harming the real economy through policy rigidity in the face of economic developments. Analysis of inflation and its effect on economic growth in. A model in which monetary policy pursues fullfledged inflation targeting adapts well to ghana. Results showed that inflation in nigeria is impassive to monetary transmission variables in the model.
Inflation targeting and economic growth nexus in nigeria. However, evidence of strong inverse link between exchange rate and prices was found in the model. Financialization, rentier interests, and central bank policy. At the beginning of last year cbn promised that by 2012 it will be.
Hence, central banks focus on inflation targeting cannot be explained by a rational social costbenefit calculation and therefore, political economy analysis must. Annual time series data, sourced from central bank of nigeria cbn statistical bulletins 19852012 were used to analyze and estimate the three multiple regression models drawn up, with the aid of software package for social sciences spss. Impact of inflation on economic growth in nigeria 20002009 1chude, daniel izuchukwu and 2chude, nkiru patricia 1lecturer, department of accountancy anambra state university igbariam campus p. But fiscal factors cannot be ignored in a country like nigeria where deficit spending has become a more or less permanent feature of the budgetary process folorunso and abiola, 2000 12. Asekunowo1 this study sought to identify the traditional and institutional inflation variables responsible for inflation phenomenon and the magnitude of the contribution of the identified variables to the rise in general price level. Proposed inflation targeting or mistargeting in nigeria. This unrest has made food production to reduce drastically particularly in the north east where most cases of killings and destruction of properties have been recorded. As a matter of fact, high rate of inflation can occur only when there is a high volume of money supply. The main features of the inflation targeting regime. Inflation, real exchange rate shocks, passthrough, real profits, real broad money supply, inflation persistence, nigeria. The inflation if it crosses the single digit is an index of a weak economy. Nigeria has been struggling against insurgency since the beginning of the democratic era in 1999. This post monitors and report the current inflation rate in nigeria. Nigeria crawled into 2009 with double digit inflationary rate, as concerns mount that the regulatory authorities are failing the economy.
However, the results emanating from these studies have been inconclusive. There have been several studies that have investigated the relationship that exist between infrastructure development and economic growth. Inflation targeting in nigeriaenglama munich personal repec. The results show that inflation targeting is marginally potent to cause growth. Nigerian inflation accelerated to the highest rate in almost 11 years in june, complicating the task of the central bank in an economy which is at risk of contracting this year. Inflation, consumer prices for nigeria fpcpitotlzgnga. Department of economics, tai solarin university of education, ijagun, nigeria mariam a. This paper investigates the impact of inflation targeting monetary policy and inflation volatility on. Nigeria inflation inflation climbs for seventh month in a row in march. Pdf inflation targeting monetary policy stance of nigeria was examined using taylor policy rule.
Threshold effects of inflation on economic growth in africa. Inflation targeting monetary policy, inflation volatility and economic. Inflation, no 1 enemy of nigerians in 2016 vanguard news. Inflation targeting monetary policy, inflation volatility and economic growth in south africa wolassa l kumo1 1 wolassa l. Inflation targeting is a monetary policy strategy in which central bank estimates and makes public a target inflation rate and then, attempts to steer actual inflation towards the target through the use of other key macroeconomic variables such as interest rate changes and other monetary tools. Agboluaje department of economics and financial studies, fountain university, osogbo, osun state, nigeria abstract this study examines the impact of monetary policy on economic growth in nigeria. Infrastructure development and economic growth nexus in.
This was anchored on the premise that inflation is a monetary phenomenon. In 1998, india adopted a multiple indicator approach 8 as the monetary policy framework against an earlier regime of monetary targeting in india. Kumo is country economist, at the african development bank, south africa regional office, pretoria. This is based on the assumption of a stable and predictable relationship between money supply and inflation. Inflation as measured by the consumer price index reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or. Inflation targeting monetary policy and output in nigeria eme a. Ajisafes study was preoccupied with the monetary factors that could cause inflation, at the expense of fiscal factors. It seem like efforts to bring nigerian inflation rate to a single digit are proven to be in vain, despite numerous promises made by the central bank to achieve that within a particular period. This page provides nigeria food inflation actual values, historical data, forecast, chart, statistics, economic calendar and news. Though nigeria inflation rate fluctuated substantially in recent years, it tended to increase through 1999 2018 period ending at 12. Thats the highest rate in over six years, and above.
Bank of nigeria has been contemplating switching to inflation targeting as a monetary policy framework. The causes of persistent inflation in nigeria victor o. It was the highest inflation rate since april of 2018, largely driven by the effects of the border closure and the new vat tax rate. Economics one of the causes of inflation in nigeria has been the various government polices to stimulate a past rate of economic growth and development since.
Nigeria at the moment, is facing imported inflation. Thus, inflation targeting and exchange rate policy have dominated cbns monetary policy focus based on assumption that these are essential tools of achieving macroeconomic stability ajayi, 1999. Evidence from a dynamic panel threshold regression approach arcade ndoricimpaa auniversity of burundi, faculty of economics and management, po box 1280 bujumbura african development bank group. Nigerias inflation has been higher than the average for african and subsaharan countries for years now, and even exceeded 16 percent in 2017 and a. The study, therefore, recommends that more policy attention should be given to inflation targeting inorder to achieve sustainable economic growth in nigeria. A nigerian newspaper and online version of the vanguard, a daily publication in nigeria covering nigeria news, niger delta, general national news, politics, business, energy, sports. Graph and download economic data for inflation, consumer prices for nigeria fpcpitotlzgnga from 1960 to 2019 about nigeria, consumer, cpi. Inflation targeting, economic growth, trends, nigeria 1 introduction inflation targeting was initially adopted by new zealand in 1990 and the features and norms. Specifically, weak link between prices and credit and interest rate channels were established. The study examined inflation targeting economic growth nexus in nigeria, with the aim of imbibing the useful lessons and avoiding the pitfalls from crosscountry experiences.
Consequeuntly, the need to understand the relationship between inflation and economic. For example, in 1998 gdp growth rate was relatively high amidst the high inflationary levels at the time. The study employed descriptive approach to the study with data sourced from the central bank of nigeria statistical bulletin of various issues. Some studies suggests that infrastructure development impacts. First, what are the important differences between an inflation targeting framework and the framework in use at the 1 revised version of a paper prepared for the seminar on monetary policy and inflation targeting, central bank of nigeria, abuja, january 19, 2008. The policy operated without an explicit nominal anchor but with low and stable inflation as one of the prime objectives and using interest rates as the primary source of. Based on inflationary perspective, our state of nation has been captured thus. Inflation targeting monetary policy stance of nigeria was examined using taylor policy rule. Causes, effects and solution of inflation in nigeria. Threshold effects of inflation on economic growth in. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy. Using time series data spanning forty one years 19702011 which was obtained from the central bank of nigeria cbn statistical bulletin volume 22, and central bank of nigeria.
A recent study by phiri 2010 further suggests that a midrange inflation target of 8 percent is sufficient in terms of maximizing economic growth in south africa. Nigerias yearonyear headline inflation entered into the doubledigit range in february. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have. July 2012 54 another important precondition for inflation targeting is the existence of stable and predictable relationship between monetary policy instruments and inflation. The annual inflation rate in nigeria rose for the seventh straight month to 12. D thesis report presented to the department of economics, university of nigeria, nsukka in partial fulfillment for the award of doctor of philosophy ph. Base money bm as the operating target, m2 as the intermediate target while inflation is the ultimate target. According to news sources, nigerian inflation as at may 2015 is.
Nigerias gdp tends to be low when the inflation rates are high apart from a few years of the 80s. The efficiency of such a monetary policy strategy is determined by the existence of the other four criteria and the assurance of. The relevance of inflation targeting as a monetary policy framework in an economy has been examined by quite a number of. Inflation can only be reduced to the barest minimum by increasing output level gdp. Thus, the study seeks to explore the interrelationship between inflation, savings and output in nigeria using a vector autoregression var approach. Nigerias inflation rate fell for a fourth straight month in may, dropping to the lowest in a year as growth in prices of most goods except food eased. Journal of economics and sustainable development issn 22221700 paper issn 22222855 online vol. The shift from exchange rate targeting to monetary targeting regime in 1974 was done with the aim of mitigating inflationary pressures arising from increased public expenditures. China, costa rica, dominican republic, ecuador, egypt. Empirical study of the impact of inflation on bank. This could be positive effect of increased domestic productivities which was the.
Dada8 abstract9 monetary policy in nigeria has faced severe challenges with little success. Achieving and maintaining price stability in nigeria. Effect of inflation on the growth and development of the. Immediately after the nigeria civil war, prices took an upward turn from their previous level due to the shortage of goods and services, caused by the disruption of productive factors by the civil war. The main purpose of this study is to empirically examine the effectiveness of monetary policy in controlling inflation in nigeria.
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