THE IMPACT OF INFLATION ON COST OF LIVING IN NIGERIA (1982-2012).

THE IMPACT OF INFLATION ON COST OF LIVING IN NIGERIA (1982-2012).

Chapter one

INTRODUCTION

1.1 Background of the Study

Inflation is an unavoidable feature of every economy in the globe. It has an impact on all countries, whether developed or developing, both favourably and badly. According to Anyanwu (2011), inflation plays a significant role in causing social and economic instability.

It is one of the most extensively studied and tested economic variables, both theoretically and practically. Its sources, consequences for other economic variables, and cost to the entire economy are well known and understood.

Nigeria, as a developing country, was unable to resist the continuously rising inflation rate, as well as the underlying reasons and repercussions.

After maintaining relatively low for a long period, Nigeria’s inflation rate began to rise in late 2003. The money supply appears to have a major impact on food price inflation in Nigeria (Anyanwu, 2011).

This affected both family budgets and consumers’ purchasing power. People battled to preserve their living standards, which eventually declined.

Many authors have written about the effects of inflation and the cost of living on the Nigerian economy, but they all agree on one thing: inflation and the cost of living have different effects on the Nigerian economy.

The problem generated by growing costs of goods and services, resulting in a higher cost of living, has proven too tough for the government to address.

During an inflationary period, fixed quantities of money buy a smaller quantity of goods and services. The real worth of money is dramatically diminished, reducing customers’ purchasing power.