IMPACT OF INFLATION ON STANDARD OF LIVING IN NIGERIA

This study sought to establish a link between the standard of living and inflation in Nigeria. The research study was informed by the escalating nature of the declining rate of the standard of living in the country. The study considers the roles of inflation, money supply, good governance and manufacturing sector capacity utilization as the determining factors of the standard of living in Nigeria. The study employs Autoregressive Distributed Lag (ARDL) and bounds testing co-integration approach to empirically examine the relationship between the standard of living and inflation, using time series data obtained from World Development Indicators from 1984 to 2024. The result of the analysis indicates the presence of a significant co-integrating (long-run) relationship between standard of living, inflation, money supply, good governance and manufacturing sector capacity utilization. The result also demonstrates that inflation and money supply significantly influence the standard of living negatively in the long run, and good governance and manufacturing sector capacity utilization are significant and positive in the long run. Also, inflation and money supply are negative and significant in the short run, while in the short run good governance is positive and significant, but manufacturing sector capacity utilization is negative and not significant. The study demonstrates that inflation reduced the standard of living in Nigeria. Therefore, effective and efficient governance is needed to increase the total output of the country through manufacturing sector capacity utilization and better money supply adjustment for the improvement and sustainability of the standard of living. Based on the findings, the government must improve on institution quality by ensuring that inflation and money supply adjustments are made to stimulate growth through manufacturing sector capacity utilization to ensure the sustenance of quality of life in the country.