Abstract
Inflation affects both the private and government sectors as well as individuals. It triggers prices if not properly managed and reduces the zeal for investment; an investment is an indispensable aspect of any economy. It is therefore against the effect of inflation on the economy that our paper examined the impact of inflation on infrastructural investment in Nigeria. Our result showed that the impact of inflation rate on infrastructural investment was negative and significant in Nigeria. We therefore, recommend that government should stick to prudent economic policies avoid excessive money printing which inflation targeting would achieved via price stabilization and also promote investment climate in Nigeria.
Highlights
Inflation affects both the private and government sectors as well as individuals
It shows that the impact of inflation rate on infrastructural investment was negative and significant in Nigeria
Inflationary conditions imply that the general price level keeps increasing over time; and this instability in the general price level undermines the functions of money as a store of value, and discourages investment and growth
Summary
Inflation affects both the private and government sectors as well as individuals. It triggers prices if not properly managed and reduces the zeal for investment; an investment is an indispensable aspect of any economy. Depreciation of exchange rates lag behind inflation, resulting in variability in real appreciations and exchange rates; real tax collections do not keep up with inflation, because collections are based on nominal incomes of an earlier year (the Tanzi effect) and public utility prices are not raised in line with inflation For both reasons, the fiscal problem is intensified by inflation, and public savings may be reduced. Fischer found support for the view that a stable macroeconomic environment, meaning a reasonably low rate of inflation, a small budget deficit and an undistorted foreign exchange market, is conducive to sustained economic growth. He presents a growth accounting framework in which he identifies the main channels through which inflation reduces growth. We present the result of our analysis and lastly in section four, we conclude and recommend
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