Inflation accounting and control through monetary policy measures in Nigeria: Multi-regression analysis (1973-2010)

Abstract

This study was carried out to evaluate Inflation accounting and control through monetary policy measures in Nigeria from 1973 to 2010. Secondary data were used empirically to do the assessment. Aggregate data on independent variables (monetary policy measures) that affect inflation were collected and analyzed using multiple regression model and the ordinary least squares estimation techniques. From the analysis carried out, it was found that some of the variables (money supply, interest rate and exchange rate) were statistically significant, which means that the studied variable could be used to predict inflation. Furthermore, domestic credit was not statistically significant, even though it could be used as a policy variable to account for inflation. Based on these findings, it was recommended that monetary supply, interest rates and exchange rates should be the principal policy variables to be manipulated in controlling inflation in Nigeria. I. Background of the study Inflation is a serious macroeconomic problem and it is an aspect of macroeconomic instability. It can make a comparison of economic conditions at different point in time quite difficult, creates complications for economic measurement, and brings uncertainty when we try to look into the future. Inflation is a substantial and sustained increase in general price level leading to disequilibrium thus undermining the ability of money to serve as a tool for market coordination. In Nigeria, monetary policy measures are used to control inflation and other macro-economic variables in order to ensure economic stability. Monetary policy involves measures designed to regulate and control the volume, cost, availability and direction of money and credit in an economy to achieve some specific macroeconomic policy objectives (Anyanwu, and Oackhenan, 1995).