Determinants of Inflation in Nigeria: A Co- Integration Approach

Inflation is undeniable one of most leading and dynamics macroeconomics issuesconfronting almost all economies of the world. Its dynamism has made it an imperativeissue to be considered. Hence the study examines the factors affecting inflation inNigeria. Time series data were employed for the study. The data was sourced from theCentral Bank of Nigeria and National Bureau of Statistics. Descriptive statistics and cointegrationanalysis were the analytical tools used. It was observed that there werevariations in the trend pattern of inflation rate. Some of the variables considered weresignificant in determining inflation in Nigeria. The previous total export was found tohave a negative impact on current inflation while the previous total import exerts apositive effect likewise the food price index. It has thus been recommended that policiesthat will set the interest rate to a level at which it will encourage investment and increasein production level could be institutionalized, importation should be reduced in Nigeriasuch that it will not encourage change of consumer taste resulting to inflating prices,exchange rate system should be maintained at a level that will not impose threat on theNigeria economy and the domestic consumption of petroleum product should be focused,not only exportation.