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Inflation and the Economy

According to The Oxford American College Dictionary, the term inflation is defined as “a general increase in prices and fall in the purchasing value of money” (Lindbergh, 2002, p. 685).  In other words, inflation, or a rise in the cost of goods and services, is also a decrease in a consumer’s ability to buy those same goods and services.  Inflation has a profound negative impact on the economy of any nation.  While there is historical data on many nations throughout the world to support the previous statements, one of the best contemporary examples of inflationary implications can be found in the West African nation of Nigeria.  Economic indicators include: purchasing power parity/standard of living, a decline in investments and savings, a rise in wages which often leads to job loss/unemployment, and a decline in overall economic growth/gross domestic product (production).  In this document, we will present graphical evidence of trends in inflation and GDP (gross domestic product).

Nigeria is one of the globe’s most heavily populated nations, with a population estimated at more than 140 million people (Central Intelligence Agency, 2008).  During the last forty-eight years, Nigeria has experienced great fluctuations in inflation (and consequently its economy) for a variety of

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reasons – independence from British rule in 1960, civil unrest, governmental corruption and more (Central Intelligence Agency, 2008).  Despite an abundance of natural resources and its status as one of the world’s largest producers of oil, Nigeria remains an impoverished nation, with 70% of its population living at or below the poverty level (Central Intelligence Agency, 2008).  In fact, Nigeria’s per capita productivity dropped to $290 United States dollars in 1988 when inflation rose to more than 38% (U.S. Department of Army, 2008).

Data from the Index Mundi (2008) shows some evidence of trends in the last five years.  When comparing inflation statistics with that of other economic indicators, a decrease in inflation, for example, seems to indicate an increase in productivity.  Please note, however, that verification of this would require further analysis via an econometric study (regression analysis) and inclusion of other variables, including the impact of the AIDS epidemic (health and age of its population), oil sales (Nigeria’s major export) and more.

References

Central Intelligence Agency (2008). Nigeria. The World Factbook.  Retrieved October 4, 2008

from https://www.cia.gov/library/publications/the-world-factbook/

Index Mundi (2008). Nigeria. Retrieved October 4, 2008 from http://indexmundi.com

/nigeria/inflation_rate_(consumer_prices).html and http://www.indexmundi.com

/nigeria/gdp_real_growth_rate.html

Lindbergh, Christine A., ed. (2002). The Oxford American college dictionary. Oxford University

Press, Inc.  New York, NY.

U.S. Department of Army (2008).  Country studies/area handbook: Nigeria. Federal Research

Division of the Library of Congress. Retrieved October 4, 2008 from http://www.country

-studies.com/nigeria/income-distribution.html

 

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