EFFECT OF INFLATION ON CONSUMPTION PATTERN OF FARMING HOUSEHOLD IN NIGERIA. A RESEARCH PROJECT MATERIAL ON ECONOMICS
Abstract
This study investigates the effect of inflation on consumption pattern on farming household in Nigeria. The Nigerian economy had faced with inflationary trends over the years and the various government policies to deal with it eluded long- term solution needed to bring about increased living standard of the Nigerian citizenry. Hence, the need for an investigation into the multi-dimensional and dynamic factors that affect inflation with the view to make appropriate recommendations to curbing it. From the study, it was revealed that all explanatory variables (fiscal deficits, money supply, interest and exchange rates) significantly and positively impacted on the rate of inflation in Nigeria during the period under review. The explanatory variables accounted for 72% of the variation in inflation during the period with the error terms capturing 28% of the variation. This research contributes to the idea that the causes of inflation in Nigeria are multi-dimensional and dynamic, requiring full knowledge at any point in time to be able to proffer solutions to the inflationary trends in the country to lead to high productivity and increased living standard of the citizenry.
CHAPTER ONE: INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Increase in price level has always been compelling problem to both policy makers and the entire Nigerian citizenry. There is perhaps more debate on the question of prices than any other issue these days. This is not surprising since depending on which side of transaction an individual is on he/ she finds his welfare adversely or beneficially affected by a movement in one or more prices. The fact that price level leads to a fall in the standard of living, unpredictability of government policy actions and of macroeconomic relationships is no more an issue of dispute.
Adejoke (2013) opined that ’’the consequence of inflation can easily be inferred. Given constant set of prices today, a situation of relatively much more chasing the same bundle of goods and services tomorrow with constant real wage income simply implies adjustment in consumption patterns. The same bundle of goods and services consumed today cannot therefore be consumed tomorrow. Hence a decrease in consumption capacity and standard of living is imminent’’.
A great deal of evidence suggests that inflation is detrimental in the long run to economic growth. Specifically, the interest in understanding the inflation process across countries and how to control it derives mainly from its key economic costs that include: erosion of standard of living, distortion of the economic decision-making of private agent with regard to investment, saving and production that ultimately leads to slower economic growth Oluwaseyi (2013).
Price can be observed as an aggregate that has close interface and a continuous relation with real macroeconomic aggregate. Also, price increase in one sector of an economy can easily be transmitted to other sectors. And most often, the responsiveness of other sector may not be entirely proportionate. Given this inter-relationship therefore, an accurate evaluation of effects of government policy measures on diverse sectors and aggregate vis-à-vis inflationary consequences cannot be adequately and readily ascertained. It is within this context that the present study becomes highly important.
Leave a Reply
You must be logged in to post a comment.