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CAUSE, EFFECT SOLUTION OF INFLATION IN NIGERIA
PREFACE
Having looked at the present trend in
the Nigerian economy it is very obvious that price of items has continued to
raise especially food related items.
A special reference will be on the
impact of inflation in income and wealth distribution of the nation (A case
study of Enugu state)
The
work is divided into five chapters one focused on the introduction and
definition of the problem presented by the study chapter two dwelt on the
review of related literature.
Chapter
three is all about research design and methodology formed of the research work.
Chapter analysis of data as well as
testing of hypothesis while the summary of findings, recommendations and
conclusion were death with in chapter five
TABLE OF CONTENTS
Title page
Preface.
Table contents
CHAPTER
ONE
INTRODUCTION
1.0 Background of study.
1.1 Statements of problem.
1.1
Objective of the study.
1.2
Significance of the study
1.3
Hypotheses
1.4
Scope and limitation of the study
CHAPTER
TWO
2.0
Review
of literature
2.1
Meaning
of inflation
2.2
Types/causes
of inflation
2.3
Peryas,
Veness of inflation
2.4
Brief
history on world inflation
2.5
Brief
history on Nigeria inflation
2.6
Inflation
and economic development
2.7
Effects
of inflation on savings
2.81
Effects
of inflation on exports
2.82
Effect
of inflation on import.
CHAPTER
THREE
RESEARCH
DESIGN AND METHODOLOGY
3.0
Source
of data
3.1 Secondary
of data
3.1.2
Questionnaire
design
3.1.3
Sample
size determination
3.2
Methods
of investigation
3.3
Method
of questionnaire distribution
CHAPTER
FOUR
4.0
PRESENTATION AND ANALYSIS OF DATA
CHAPTER FIVE
5.0
Summary
of findings recommendations, conclusions and areas of further research
5.1
Summary
of findings
5.2
Recommendations
5.3
Conclusions
5.4
Areas
of further research.
CHAPTER ONE
INTROUDCTION
1.1 BACKGROUND OF STUDY
Every country in the world aim at
achieving economic growth and development. This is only possible if a country
has adequate sources. In developing countries especially those in sub-Saharan
Africa. The resources to finance the optimal level of economic growth and
development are in short supply.
Inflation, economic growth and interest
rate concepts that are central and interrelated in Macro economic. A proper
understanding of these concepts is therefore very necessary in order to get a
good grasp of how inflation and interest rate has effected growth in Nigeria
over the past eleven years. Is from this view that gives what have been
expressed by various people to the theoretical and empirical relationship that
has been estimated between them.
Inflation is said o occur when the
genral level of prices rises rapidly and persistently over a givebn period of
time. This is undesirable to the public and policy makers. From this of view of
the public inflation causes uncertainty about future prices. This effect
decisions on expenditure, savings, investment and misallocation of resources.
It also allows substantial in distributions of income and wealth from savers to
borrowers. To policy makers, inflation hampers economic growth and development
as it discourages investment and savings. These factors explain why policy
makers put in lots of efforts to reduce inflation and why several authors focus
attention on this issue. Inflation is now one of the intractable problems
facing the Nigeria economy.
Having registered low rates of inflation in years immediately after
independence. The country experience double digit in 1960. this was as a result
of the civil war. The next period of high inflation was (1974- 1979), when the
wage freeze was discontinued as recommended by Udoji salary review
commission.
Reduction of the high inflationary
pressure is considered one of the most critical Macro- economic objectives in
Nigeria. A number of approached to the explanation of the phenomenon of
inflation have been suggested and tested in the economic literature. Thus such
concept of inflation has been suggested in the economic literature. Thus such
concept of inflation has been popularized including Demand Pull inflation which
occurs when aggregated demand rises faster than aggregated supply another form
of inflation is cost push which occurs when price increase, its originated from
supply side of economy either through profit push or wages push resulting from
trade union action. For structural inflation, it seeks to explain the long term
tendency of prices especially in the industrialized western countries.
There do also exist monetarists. It explains and observes inflation rate in
different countries to respective growth rate of money supply. Inflation can be
transmitted from one country to another, this is usually referred to as
imported inflation and occurs when a country engages in international trade.
Inflation has various effect on the economy as a whole of which economic growth
and interest rate are of great important. These three variables are
interrelated. There are many indicators of economic growth, for the purpose of
this research study.
Finally, the relationship between inflation, interest and economic growth will
be fully examined. It should be noted that interest rate are to help in
mobilization of financial resources and to the promoting or promotion of
economic growth and development. Interest rates effect the level of consumption
on the hand, it is one of the major tools of monetary policy. It was regulated
and controlled by the central bank of Nigeria.
The direct and magnitude of changes in market interest rate are of primary
importance to economic agents and policy makers. Economic growth is an increase
in the average rate of output produced per person, usually measured on per
annum basis. Interest rates are the rental payment for the use of credit by
borrowers ad return payment with liquidity by lenders.
Inflation is neither new in the
economic system of Nigeria nor the world at large. Variations in
magnitude or rates have been noticed to be in existence.
In Nigeria the rate of inflation was
about 10 percent between 1969 and 1970. Prices rose by about 14 percent in 1970
(immediately after the civil war of 1970). Then fell to 3 percent in
1972. Rose by about 16.1 percent in 1974 and reached a rate of about 34 percent
increase in 1975.
In the 80’s, the rate of inflation
between 1908 and1982 was around 30 percent with the rest of the 80’s at the
rate of 40% averagely.
The 90’s were at the rate of 40 to 50%
between 1990 to 1992 and then 1994 rate was officially put at above 60
percent. Inflation was and is still the greatest task to government’s
policymakers in the 1990’s.
In the world, between 1979-1801, prices
rose by more then 50 percent. Also between 1939-1941, the prices level was
record to be almost what it was before.
The height of Herry V111’s debasement
in England (through the mint reducing the weight of remitted coins, lowering
their gold and silver content, and increasing the normal value of existing
coins by assigning them higher values as well as melting down plate and
ornament taken from the ransacked monasteries), and prices between many 1542
and mid 1551, had an inflationary rate of 16 percent per annum 23 percent
during war with France and almost 30 percent during the first world war.
This is about the highest rate attained in the world history.
It is now evident that inflation
persists both in the developed and developing countries, with difference in
magnitude or rates. The rate is developed countries making comparison
with present situations, as the above noted rates were attained during the
seventeenth century and the early part of the eighteenth century (1799-1801),
and the early to mid parts of the nineteenth century (1939-1951).
In the case of Nigeria, the rates were
attained in the rate nineteenth century (1969-1975).
Inflation simply refer to a continuous
or in ---- rise in prices.
According to Webster’s seventh new
collegiate dictionary, inflation is defined as an increase in the volume of
money and credit relative to available good resulting in a substantial and
continuous rise in the general price level. This definition points out
the fact that inflation cannot occur unless there is undue increase in the volume
of money and credit. This brings about continued rise in general price
level of goods, which in not being matched by the proportionate quality of
goods and service in the economy.
Inflation become significant in Nigeria
after the Nigeria civil war thought it might have been in existence long before
then.
Immediately after the Nigeria civil
war, prices took an upward turn from their previous level due to the shortage
of goods and services, caused by the disruption of productive factors by the
civil war.
Furthermore, the caused factor of
salaries and wages review should not be left unmentioned. The review
started with the Adhoc Award of 1970 which was followed by the Udoji and
William Awards of 1974. all these awards intensified the inflationary
pressure.
Also, the high prices if imported goods
arising from increases in foreign prices and instability of international
exchange rates. Surcharge from post congestion, storage facilities,
marketing arrangements plus the distribution new work.
The issue of gradual remove of the
remaining 20 percent on oil subsidy is the most current inflationary element in
the Nigeria economic system.
If inflation were to every one in
exactly the same way and degree, it would have no importance what so
ever. It’s social significance arises from the fact that it always does
affect people differently. It’s effect on have wife (A) would differ from
it’s effect on house wife B depending on personality income and family. Whether
in village or town are of relevance to the study.
1.2 STATEMENT
OF PROBLEM
The inflationary period is a time of
high prices of goods and services this lowers the quantity and type of products
(goods and services) purchasable by the messes in Enugu state at any point in
time. The problem posed is that Enugu dwellers others in the society are unable
to purchase types (quality) and quantities of desired products during
inflation.
During inflation, income (especially of
those fixed income earners and the very poor ones in the society) are unable to
match the increasing prices of goods and service. This continues as long
as rising prices and falling purchasing power persists. The problem as
the ability of masses to purchase products” in the light of continued rising
prices become reduced.
Equally of importance is the issue of
inflation giving rise to the different societal classes, thereby creating gaps
in the society with income as the distinctive factor. There is a high gap
between incomes of fixed incomes earners and the profit earners. This is
because the profit earners incomes tend to rise with the rising price of
products as opposed to those of the fixed income earners.
It is also worth while to note that
during an inflationary period, saving decline. This is because a decline
in savings results in low investment, whereas low investment retards economic
growth.
The pertinent questions to ask here is
how will the masses be able to purchase the desire mix of products. How
will the fixed income earners be able to maintain their standard of living at
periods pf continued rising prices? How do poor masses make both ends meet
under a situation of declining purchasing power?
How will the government bridge the gap
between the fixed income earners and profit earners?
1.3 OBJECTIVES
OF THE STUDY
The objective of the researcher is
1.
To find out how inflation can be reducing in Nigeria through co-operative
2.
To find out low the negative effect of inflation on income can be corrected or
averted.
3.
To identify the class of workers that inflation affect most
1.4 RESEARCH QUESTION
1. What are the
method used to reducing inflation in Nigeria?
2. Is there any
negative effect on income distribution?
3. what are the class
of workers involved in this effect?
4. Does the income
distribution enable the individuals to survive in Nigerian economy?
5. To make
recommendation based on the finding?
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