CHAPTER ONE
INTRODUCTION
Introduction
In this contemporary society one major target of a macro economic polices is how to achieve stability in price level. stability here does not mean a situation where price will remain fixed, it means a situation where variation in price over a long period is minimal Price stability refers to relative stability in price over a given period of time because for some reasons prices rise and fall periodically. Sellers in the commodity market labour market and capital market kept increasing there prices for some economic and other reasons, in the commodity market producer or sellers complain of increasing cost, employees in the labour market form union and fight for increased wages to enable them meet up with the high cost of living and depreciation in the purchasing power of money, while suppliers of land and capital increase there rents and interest with excuse of rising cost of funds. One ultimate effect is that prices continue to go up from time, if this increase in prices where gradual may be one or two percent per year, people can easily adjust without much complaint. But when prices are rising generally at very fast rate people become very worried and that is when the effect of rising prices becomes of significance to the economy and however lead to a situation known as inflation in view of their devastating effect of inflation in Nigerian economy, this project work will in chapters that follows carry one a “statistical analysis on inflationary trend in Nigeria from the period of 2001 to 2010
1.2 BACKGROUND OF STUDY
According to oxford advance learners dictionary inflation is a general rise in the prices of goods and services in a particular country resulting in a fall in the value of money Webster new English collage dictionary defines inflation as “an increase in volume of money and credit relative to available goods and services resulting to substantial and continuing rise in general price levels. Solow (1979) sees inflation as going on when one needs more and more money to buy some representative bundle of goods and services or a sustained fall in purchasing power of money steady persistent rise in prices caused by too much money chasing too few goods. It is a state of conflict and disequilibrium in which a given community is struggling to acquire more goods and services that are available. To illustrate the meaning of inflation the more consider the diagram. A From the diagram above it can be observed that N1000 is originally chasing 200 units of goods and services and the price is established at say A on the price line, the supply while goods and services merely increased by four times to 800 units if the community competes for these limited goods and services there will be excess demand over supply at current price A, the result to too much money chasing too few goods it will be that price will steadily rise to B and may continue to rise if left unchecked by the community.
1.3 STATEMENT OF PROBLEM
In recent past there has been alarming increase on the rate of inflation imposing on adverse effect on saving and investment, it has also affected the living standard of Nigerians mostly affected the are the public servants whose incomes are relatively fixed, considering utilization where many industries in Nigeria produce below full capacity because of high cost of raw material, machines, distorting our trade relations with other countries across the border and responsible for constant industrial unrest since with persistent increase in prices, unions like labour and trade union continues to agitate for higher wages This however poses a great effect on the performance of various sector of our economy and analysts are not left out in this situation of examining the rate of inflation in our economy in the world. In view of the difficulties created by inflation in Nigeria, the problem of this research work becomes to investigate the trend of quarterly inflationary rate in Nigeria for the periods in view as well as ascertain whether there is seasonal variation in the inflationary rate for those periods and if the yearly inflationary rate depend on some quarters of the year in focus. Another problem of these research survey is to examine how inflationary rate in this period are affected by unpredicted external factors as well as cyclical fluctuation in the trend of inflationary rate and also examine the root causes of inflation in the country and the control measures taken by government, whether it has yielded any significant result against this devastating problem of inflation which has eaten deep into our economy
