ABSTRACT

The main purpose of this study is to measure the relationship between inflation and economic growth in Nigeria. The methodology employed in this study is the quantitative research design. Consumer price index (CPI) was used as a proxy for inflation and the GDP as proxy for economic growth, to examine the relationship. Other explanatory variables include exchange rate, interest rate and narrow money supply.The scope of the study spanned from 1982 to 2015. Ordinary least square method, Augumented dickey fuller (ADF), Cointegration Test Result, Durbin Watson Statistics test and T-test was used to test the variables most likely to impact on economic growth in Nigeria due to inflation. The findings also shows that there is strong relationship between inflation and economic growth in Nigeria, that exchange rate has negative impact on economic growth and that high interest rate discourages investment and hence forestalls economic growth. Furthermore the result also showed that narrow money supply had positive relationship with inflation but insignificant impact on Nigeria’s economic growth. It is therefore recommended that federal Government, through central bank of Nigeria (CBN) should maintain low interest rates as this was shown to be significantly to improve economic growth in our study. Also they need to strengthened and diversify the export base of Nigeria Economy as to improve economic growth. We equally recommended that for sustainable economic growth to be achieved in Nigeria, the level of inflation should be stabilized by the monetary authorities.