THE STATISTICAL ANALYSIS ON INFLATIONARY TREND IN NIGERIA

Abstract

The study was on the statistical analysis on inflationary trend in Nigeria from 2001-2010. The objective of the study was to ascertain whether there is a quarterly increase in trend of inflationary rate in Nigeria from 2001 – 2010 and make forecast for its future occurrence. To investigate if there is any seasonal variation in the quarterly inflation rate in Nigeria for the period in view. To ascertain if there is significant relationship between inflation rate and economic growth from 2001 -2010. To determine the undependability or otherwise of inflationary rate in some quarters of the year and the hypotheses were formulated. The population of the study was 200 CBN staff that was selected randomly. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up auditors, banking supervisors, customer care officers, financial marketers were used for the study.

CHAPTER ONE

INTRODUCTION

• Background of the study

In this contemporary society one major target of macroeconomic policies is how to achieve stability in price level. Stability here does not mean a situation where price will remain fixed, it means a situation where variation in price over a long period is minimal, Price stability refers to relative stability in price over a given period of time because for some reasons prices fluctuate periodically. Sellers in the commodity market labor market and capital market kept increasing their prices for some economic and other reasons, in the commodity market producer or sellers complain of increasing cost, employees in the labor market form union and fight for increased wages to enable them meet up with the high cost of living and depreciation in the purchasing power of money, while suppliers of land and capital increase their rents and interest with excuse of rising cost of funds.

One ultimate effect is that prices continue to go up from time, if this increase in prices where gradual may be one or two percent per year, people can easily adjust without much complaint. But when prices are rising generally at very fast rate people become very worried and that is when the effect of rising prices becomes of significance to the economy and however lead to a situation known as inflation in view of their devastating effect of inflation in Nigerian economy, this project work will in chapters that follows carry one a “statistical analysis on inflationary trend in Nigeria from the period of 2001 to 2010.  According to oxford advance learners dictionary inflation is a general rise in the prices of goods and services in a particular country resulting in a fall in the value of money Webster new English collage dictionary defines inflation as “an increase in volume of money and credit relative to available goods and services resulting to substantial and continuing rise in general price levels. Solow (1979) sees inflation as going on when one needs more and more money to buy some representative bundle of goods and services or a sustained fall in purchasing power of money steady persistent rise in prices caused by too much money chasing too few goods. It is a state of conflict and disequilibrium in which a given community is struggling to acquire more goods and services that are available.

Friedman (1963) argued that “inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output”. Furthermore, several empirical studies has supported the monetarist proposition that money is indeed a significant variable in determining the behavior of consumer prices and a critical channel of monetary policy transmission in both advanced and developing economies (see Moser, 1995; Fakiyesi, 1996; Kuijs, 1998; Qayyum, 2006; Wolde-Rufael, 2008; Ratnasiri, 2009; Bashir et al, 2011 and Kabundi, 2012). The monetarist view, however, has not always been widespread (see Butt and Jamal, 1988 and Chaudhary and Ahmad, 1996), as the literature is replete with many other factors that could affect the level of inflation. Mordi et al (2007) grouped these factors into fiscal (financing of budget deficits), balance of payments or supply side factors (exchange rate movements) and institutional factors (the level of independence of the monetary authority). Others were structural factors, agro climatic conditions and inflation inertia.

Nigeria has witnessed high and volatile inflation rates since 1970s. Masha (2000) indicated that the high inflation episodes in the country since the 1970s were largely driven by the growth of money supply and some factors reflecting the structural characteristics of the economy. These factors included climatic conditions, wage increases, the structure of production, currency devaluation and changes in terms of trade. Adenekan and Nwanna (2004) indicated that by 1988 and 1989, inflation had skyrocketed to more than 50 per cent in Nigeria. Furthermore, Bawa and Abdullahi (2012) stated that in spite of the fact that inflation declined to about 7.5 per cent in 1990, it rose to 44.8, 57.2 and 57.0 per cent, respectively, in 1992, 1993 and 1994. It reached an all-time high of 72.8 per cent in 1995. This according to Mordi et al (2007) was due to excess money supply, scarce foreign exchange and severe shortages in commodity supply, as well as continual labor and political unrest following the annulment of the June 1993 elections. Extensive research to address inflationary problems in Nigeria by investigating its main determinants were conducted, with varying results largely pointing to the above factors, depending on the methodology applied and objectives set to achieve, among others. Thus, it is commonplace that the determinants of inflationary pressures in Nigeria are multi-dimensional. There was, however, still no consensus regarding its ultimate source, be it monetary or structural factors. In addition, some authors have estimated the size of inflation inertia in order to give a better guide, on how much, past inflation impacts on determining its current level. In Nigeria, Adenekan and Nwanna (2004), Odusanya and Atanda (2010) and Imimole and Enoma (2011) estimated 0.64, 0.39 and 0.69 degrees of inflation inertia, respectively. Thus, this paper examined the statistical analysis on inflationary trend in Nigeria

• STATEMENT OF THE PROBLEM

In recent past there has been alarming increase on the rate of inflation imposing on adverse effect on saving and investment, it has also affected the living standard of Nigerians mostly affected the are the public servants whose incomes are relatively fixed, considering utilization where many industries in Nigeria produce below full capacity because of high cost of raw material, machines, distorting our trade relations with other countries across the border and responsible for constant industrial unrest since with persistent increase in prices, unions like labor and trade union continues to agitate for higher wages This however poses a great effect on the performance of various sector of our economy and analysts are not left out in this situation of examining the rate of inflation in our economy in the world.  In view of the difficulties created by inflation in Nigeria, the problem of this research work becomes to investigate the trend of quarterly inflationary rate in Nigeria for the periods in view as well as ascertain whether there is seasonal variation in the inflationary rate for those periods and if the yearly inflationary rate depend on some quarters of the year in focus  Another problem of these research survey is to examine how inflationary rate in this period are affected by unpredicted external factors as well as cyclical fluctuation in the trend of inflationary rate and also examine the root causes of inflation in the country and the control measures taken by government, whether  it has yielded any significant result against this devastating problem of inflation which has eaten deep into our economy.

1.3 OBJECTIVE OF THE STUDY

The main objective of this study is the statistical analysis on inflationary trend in Nigeria. But for the successful completion of the study; the researcher intends to achieve the following sub-objectives;

1. To ascertain whether there is a quarterly increase in trend of inflationary rate in Nigeria from 2001 – 2010 and make forecast for its future occurrence.
2. To investigate if there is any seasonal variation in the quarterly inflation rate in Nigeria for the period in view.
3.  To ascertain if there is significant relationship between inflation rate and economic growth from 2001 -2010.
4.  To determine the undependability or otherwise of inflationary rate in some quarters of the year.
   • RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H_o:   there is no significant increase in the trend of inflation rate of Nigeria from (2001 -2010)

H_i:    there is significant increase in the trend of inflation rate of Nigeria from (2001 -2010)

H_o:   there is no significant relationship between inflation rate and economic growth from 2001- 2010

H_i:    there is significant relationship between inflation rate and economic growth from 2001 -2010

H_o:   yearly inflationary rate is independent of variation of the quarters of the years from 2001 -2010

H_i:    yearly inflationary rate is not independent of the quarters of the year from 2001 – 2010.

• SIGNIFICANCE OF THE STUDY

It is believed that at the completion of the study, If the inflationary rate in the economy of Nigeria is found to be on increase it will enable the federal government to fight inflation through introducing constructional monetary and fiscal policies. Secondly the study will enable the federal government to implement policies and programs like price control measure and rationing of available products in those quarters of the year, where there is more influence of inflation, if it is found out that there will be or there is a strong seasonal variation and if also that the yearly inflationary rate depends on some quarters/period of the year from the analysis carried on the period of the years under review. The study will also be of great benefit to the researchers who intends to embark on research on similar topics as it will serve as a guide. Finally, the study will be of great importance to academia’s, lecturers, teachers, students and the general public.

• SCOPE AND LIMITATION OF THE STUDY

The scope of this study covers the statistical analysis on inflationary trend in Nigeria. The researcher encounters some constrain which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 DEFINITION OF TERMS

STASTICAL ANALYSIS: Statistical analysis is a component of data analytics. In the context of business intelligence (BI), statistical analysis involves collecting and scrutinizing every data sample in a set of items from which samples can be drawn. A sample, in statistics, is a representative selection drawn from a total population.

INFLATIONARY: In economics, inflation is a sustained increase in the general price level of goods and services when inflation is high. This can cause a wage spiral. In a sense, inflation begets further inflationary expectations, which beget further inflation.

TREND:  A general direction in which something is developing or changing.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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