IMPACT OF INFLATION ON INVESTMENT AND ECONOMIC GROWTH IN NIGERIA

IMPACT OF INFLATION ON INVESTMENT AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study investigated the impact of inflation on investment and economic growth in Nigeria. Since Nigerian financial sector liberalization is anchored on interest rate and exchange rate deregulation and the inflation targeting monetary policy, therefore exchange rate was incorporated in the study. The OLX technique was used in this study to estimate the two models specified in the study. Other tests such as unit root test and cointegration test were conducted to determine the stationarity and long term relationship among the variables. The result of the investigation showed that both inflation has a negative effect on investment level and economic growth but exchange rate has positive effect on investment and economic growth. The study recommends that in order to curb inflation, government should create a conducive employment opportunity, transparency in the fiscal operations to bring about realistic fiscal deficits, exchange policy should be designed to bridge the savings investment gap, enhance government revenue and reduce the fiscal gap in order to ultimately enhance economic growth which will bring about development.