THE INFLATION IN NIGERIA: CAUSES, CONSEQUENCE AND CONTROL
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This project deals with inflation in Nigeria causes, consequences and control which will be discussed under five consecutive chapters for a better comprehension and calamity purpose. This will be discussed in chapter to chapter.
Chapter one deals with the introduction aspect which includes the background of the study, statement of the problem, research questions, scope of the study as well as the significance of the study and definition of terms.
Inflation as an existing phenomenon has a negative connotation to the society at large which can be seen as the consequences. But with the information gathered it will enable one to make adequate suggestions which can stand as a control measures to the inflation problem in Nigeria.
Chapter two is all about the review of the related literature to the aforementioned topics in consideration of meaning of inflation, nature of inflation and control measures of inflation.
Chapter three deals with a research methodology and design. The method used in gathering information includes research questions, observation and also interview method. Other essential ingredients in the chapter include computation of the study, area of study, determination of sample size, sample and sampling techniques etc.
Chapter four embraces data connotation and data analysis with various instruments for data collection all the secondary data collected will be presented with the help of table under the analysis of the information.
Finally, the summary of the findings, recommendation will be based on the analysis of those secondary data and then by drawing of conclusion including references.
TABLE OF CONTENT
TABLE OF CONTENTS
- Background of the Study
- Statement of the Problem
- Objective of the Study
- Research Questions
- Significance of the Study
- Scope of the Study
- Limitation of the Study
- Definition of Terms
- Review of Related Literature
- Causes of Inflation
- Negative effects of Inflation
- Control of Inflation
- Monetary Policy
- Uses of Fiscal Policy
- Uses of Physical Controls.
- Research Design and Methodology
- Sources of Data (Secondary source of
- Location of Data
- Methods of Data Collection.
- Literature Work Only
- Method of Data Analysis.
- Presentation and Analysis of Data.
- Presentation of Data
- Analysis of Data
- Interpretation of Result.
- Summary, Conclusion and Recommendation
- Summary of Work
1.1 BACKGROUND OF THE STUDY
Nigeria economy has suffered so much since the attainment of independence in 1960. The causes of this suffering could be chiefly attributed to price fluctuation (Inflation) and therefore it is necessary that this vice is defined, exposed and controlled for economic and social progress of the masses.
Inflation can be defined as a continuous rise in price in goods and services caused by too much money in circulation. Any economy that tries to grow rapidly than the required rate of growth is likely to suffer inflation which could be classified in terms of types depending on the degree and intensity of the price increment.
The existence of this financial vice called inflation is attributed to a number of factors and they include;
High cost of production, poor storage facilities increase in wages and salaries with a corresponding increase in the supply of goods and services, low domestic productivity in the industrial and agricultural sector, excessive financing and rapidly increasing in agricultural expenditure.
Inflation is an increase in the money and credit relative to available goods and service resulting in a general price level. In order to observe that there is inflation there should be a rise in the volume of money credit. This rise must exceed the available goods and service an the country. There should a the substantial and centurial increase in the gene price level of goods and services. Rise in prices may be of various magnitudes accordingly different names have been given to inflation depending upon the rate of rise in prices .if the prices of goods and service rise this in just saying that the value of money has fallen because less goods and service can now be obtained in exchange for a given sum of money. Prices vary inversely with the value of money. The value of money is this shown by the level of prices a general fall in process indicates rise on the value of money. The price of a commodity is the amount of money that has to be paid for it. The value of money is the quality of goods and service it will buy. The market price is the indicator of relative value of goods and service in terms of money.
The consequences of inflation could be grouped in to two (2) bad and good effects. This is probably why some economy recommends mild inflation while others abhor it entirely. But for the sake of this project, inflation will be related as a cankerworm, which weakens the economic activities of an economy.
It is therefore, necessary to put off inflation permanently from our economy since it can cause a lot of harm to the economy with the result of discouraging investors from investing.
So, it is worthwhile to put in place some measures like monetary policy, fiscal policy and physical checks to control inflation in our economy.
The term inflation could be defined as a process of steady and persistent rising in prices of goods and services due to the volume of money in circulation.
Nigeria has experienced high volatility in inflation rates since early 1970’s there has been some period of high inflation in excess of 30 percent, this is because money growth has often in excess of real economic growth. In the years preceding 1975 the rates were below 30 percent. Nine years later in 1984 due to pressure from debtor groups to reach an agreement with the international monetary fund (IMF) one of the conditions was devaluation of domestic currency. The expectation that devaluation was imminent fuelled inflation as prices of adjusted to the parallel rate peaked at 39.6 percent but in the year 1997 and 1998 inflationary trend started a downward trend and stood at about 10 percent.
However, one major target of micro-economic policies now is how to achieve stability in price level, stability here does not mean a situation where price will remain fixed, but it means a situation where variation in prices will lost over a long period of time so that people can easily adjust with the price without much complaints.
Despite the fact that inflation increase investment which creates employment of production resources and hence greater output there are indications that discourages savings thereby increasing the risk of holding raw each and reducing the value of money inflation will lead to a fall in the burden of national debt by making a fixed debt amount to lose its purchasing power. During inflationary periods the value of money which is the purchasing power of money Falls inflation increase the earnings of business shareholders and other whose income are fixed in money terms but in spite of these there are complained that it reduced the standard of living of the people whose income are fixed thus increasing their cost of education welfare and culture facilities available. This situation however makes it difficult for the poor masses with fixed income difficult to survive in the economy. Inflation will also lead to a balance of payment deficit. The rise in the prices of home goods will make more consumer goods to be imported thereby making the county to spend more foreign currency that what it will received abroad from exportation. However since the real value of money fall during inflationary period people prefer to spend it rather than investment. Also debtors gain while creditors lose because the burden of debt falls and the money loses its purchasing power.
1.2 STATEMENT OF THE PROBLEM
Inflation reduces the standard of living of the people whose income is fixed thereby increasing their cost of education, welfare and cultural facilities available. This situation however, makes it difficult for the poor masses with the fixed income to survive in the economy.
Inflation leads to a fall in the burden of national debt by making a fixed debt amount to lose its purchasing power.
Inflation also leads to a balance of payment deficit when the price of domestic goods rise and make more consumer goods to be imported thereby making the country to spend more foreign currency than what it will receive from exportation. However, since the real value of money fall during inflationary period, people prefer to spend it rather than investment.
1.3 OBJECTIVES OF THE STUDY
The study embraces the causes, consequences and control of inflation in the Nigeria economy. The negative effect has indeed remained stagnant towards the economic development. However, the main objectives of this study are as follows:
- To know its influence in the Nigeria
- To determine how inflation affect our economy.
- To find out the means and provides solution that can be adopted in solving the problem of inflation in Nigeria
The study will also educate the masses on the need to minimize the problem associated with inflation on a bid to have an economic boom instead of boom.
To give suggestions on how to curb inflation through government agencies and individuals.
1.4 RESEARCH QUESTIONS
- What are the problems that inflation has been causing in our economy?
- Can inflation reduce the standard of living of the people whose income is fixed, thereby, increasing their cost of education, welfare and cultural facilities?
- Does inflation head to a fall in the burden of national debt by making a fixed debt amount to lose its purchasing power?
- How can inflation lead to a balance of payment deficit when the price of domestic gods rise and make more consumer goods to be imported thereby, make the country to spend more foreign currency than what it will receive from exportation?
- How can the real value of money fall during inflationary period, people prefer to spend it rather than investment?
1.5 SIGNIFICANCE OF THE STUDY
The significance of this study is to achieve a great success as we can in solving the problems of inflation in our economy.
The significance of this study will also be of immense importance to the following groups:
- To other researchers
- To central bank of Nigeria
- To the government and the public at large.
To other researchers, they will use it as a guide and base from consultation of their research work. Its significance to the central bank of Nigeria is that it will help them in strengthen the inflationary trend in the country.
This study will also enable the citizens to adjust to the demand of economic policies which are geared towards finding a lasting solution to this inflation so as to promote economic policies that favour our nation.
1.6 SCOPE OF STUDY
The scope of this study will be centered on unilever Nigeria Plc. Enugu.
This research work was face with so many problems which hindered its comprehensive study during the period.
During the course of this research, a lot of factors militated against the effectiveness of the research work.
1.7 LIMITATION OF THE STUDY
In this research work, numerous problems were encountered which limit the work to this extent of survey. During the course of this research, a lot of factors militated against the effectiveness of the problems include;
- FINANCIAL CONSTRAINT: As students, there was not enough capital to spend in transport and fact finding and borrowing of necessary literature that would have helped in the writing of this research work.
- TIME FACTOR: It was difficult for the researcher to complete the study within the record time because of the pressures of other academic works.
- INADEQUATE OF STATISTICAL DATA: The statistical data were cumbersome to lay hands on due to the fact that there were inadequate of some sellers to communicate well with their customers.
1.8 DEFINITION OF TERMS
INFLATION: Inflation can be defined as the persistent rise in the price of goods and services due to the volume of money in circulation.
CBN: It means Central Bank of Nigeria. This is a financial institution set up by the control government of Nigeria to carry its financial business activities of printing of currencies and minting of coins, raising loan, influencing the money supply, controlling the activities of other financial institution.
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