The Main Determinants of Inflation in Nigeria
IMF Working Papers, June 1, 1994
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Bibliographic details
- Authors: Gary G. Moser
- Published: June 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849806.001
Summary
- Provides a selective review of the literature on the determinants of inflation in Nigeria.
- Analyzes the dominant factors influencing inflation.
- Presents empirical results from a reduced-form elasticities model.
- Discusses policy implications of the empirical results.
Key findings
- Monetary expansion, driven mainly by expansionary fiscal policies, explains to a large degree the inflationary process in Nigeria.
- Devaluation of the naira is an important factor affecting inflation.
- Agroclimatic conditions (rainfall) play a significant role in overall movements in prices, given the considerable role of food commodities in the CPI.
- The impact of naira depreciation on inflation is strongly influenced by concurrent fiscal and monetary policies.
Empirical approach and evidence
- Uses a reduced-form elasticities model to estimate determinants of inflation.
- Results confirm basic findings of earlier studies regarding the primacy of monetary expansion in explaining inflation.
Policy implications and recommendations
- Addressing expansionary fiscal policies is critical to controlling monetary expansion and thereby inflation.
- Monetary policy stance should be coordinated with fiscal policy to mitigate the inflationary effects of currency depreciation.
- Agroclimatic factors (rainfall) should be fully taken into consideration in inflation analysis and policy design because of the weight of food commodities in the CPI.
The Main Determinants of Inflation in Nigeria — Gary G. Moser, June 1, 1994 (IMF Working Paper).