DETERMINANT AND GROWTH OF INFLATION IN NIGERIA

Abstract This study investigates the determinants and trajectory of inflation in Nigeria, with a specific focus on its interaction with key macroeconomic variables such as economic growth, public debt, broad money supply, interest rate and population growth. Grounded in the Nigerian economic landscape, the research covers the period from 1990 to 2023, providing a thorough analysis that captures long-term trends as well as recent economic developments. Adopting a macroeconomic framework, the study seeks to uncover the systemic drivers behind inflationary trends rather than analyzing inflation within isolated sectors. Employing a quantitative research design, the study utilizes time-series data sourced from reputable institutions including the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS). The analysis begins with the co-integration tests and the application of the Autoregressive Distributed Lag (ARDL) model to capture both the short-run dynamics and long-run equilibrium relationships among the variables. This is followed by the Augmented Dickey-Fuller (ADF) test to examine the stationarity of the data series. Model diagnostics were also conducted to ensure robustness and reliability of the results. The findings reveal that inflation in Nigeria is significantly influenced by broad money supply, interest rates and public debt, among other variables. While short-run fluctuations in these indicators may temporarily affect inflation levels, their long-term effects tend to reinforce inflationary pressure if not properly managed. The study also finds that population growth and economic expansion can indirectly fuel inflation by increasing aggregate demand. The study concludes that managing inflation in Nigeria requires a holistic and sustained policy approach. Addressing its root causes especially monetary expansion and fiscal imbalances will be essential for ensuring price stability, promoting sustainable economic growth, and safeguarding living standards.