An Evaluation of the Nexus Between GDP, Inflation, and Economic Growth in Nigeria
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Background of the Study
The interrelationship between GDP, inflation, and economic growth is central to macroeconomic policy debates. In Nigeria, robust GDP growth is often seen as the engine of development; however, if accompanied by high inflation, the benefits of growth may be offset by rising living costs and diminished purchasing power (Ibrahim, 2023). This nexus is particularly important in emerging economies where rapid growth can sometimes lead to overheating and structural imbalances (Chukwu, 2024). In Nigeria, the delicate balance between stimulating growth and maintaining price stability is further complicated by factors such as exchange rate volatility, fiscal deficits, and external shocks (Afolabi, 2025).
Recent policy reforms have attempted to address these challenges by coordinating fiscal and monetary policies to harness the positive effects of GDP growth while curbing inflationary pressures. However, empirical evidence on the effectiveness of these interventions is mixed. Some studies suggest that while GDP growth can promote economic expansion, it may also trigger inflation if not accompanied by adequate supply-side responses. Consequently, understanding the nexus among GDP, inflation, and economic growth is critical for designing policies that support sustainable development (Nwankwo, 2023).
This study will examine the complex interactions between GDP, inflation, and economic growth in Nigeria by employing a combination of econometric analysis and qualitative assessments. The research will assess whether periods of high GDP growth have been consistently associated with stable price levels and sustained economic expansion, or if inflationary pressures have undermined these benefits. The findings are expected to provide policymakers with valuable insights into the conditions that optimize growth while keeping inflation in check.
Statement of the Problem
Nigeria’s economic trajectory has been marked by periods of vigorous GDP growth, yet high inflation has frequently eroded the gains from such expansion. The central problem is the ambiguous relationship between GDP growth and inflation, which raises concerns about the sustainability of Nigeria’s development model. While economic theory suggests that increased output should foster growth without necessarily leading to runaway inflation, the Nigerian context reveals that inflation often intensifies during growth spurts. This divergence undermines consumer purchasing power, destabilizes markets, and ultimately hampers long-term economic progress (Ibrahim, 2023).
Furthermore, existing fiscal and monetary policies appear insufficient in moderating the inflationary impacts of rapid growth. External shocks, such as fluctuations in global oil prices, add to the complexity, making it difficult for policymakers to maintain a balanced macroeconomic environment. This study seeks to unravel the factors contributing to the nexus between GDP, inflation, and economic growth in Nigeria, identifying the points where policy interventions have failed to mitigate inflation despite robust growth. Addressing this problem is essential for ensuring that Nigeria’s growth is both sustainable and inclusive (Chukwu, 2024).
Objectives of the Study
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To evaluate the interrelationship between GDP, inflation, and economic growth in Nigeria.
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To identify the factors that disrupt the positive effects of GDP growth on economic stability.
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To propose policy measures that can harmonize growth with price stability.
Research Questions
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What is the nature of the relationship between GDP growth, inflation, and economic growth in Nigeria?
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Which factors contribute to the divergence between GDP expansion and price stability?
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How can policy frameworks be reformed to ensure that GDP growth translates into sustainable economic progress?
Research Hypotheses
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Higher GDP growth is associated with improved economic performance, provided that inflation is kept under control.
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External shocks and fiscal imbalances significantly moderate the positive effects of GDP growth on economic stability.
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Integrated policy reforms can enhance the nexus between GDP growth and sustainable economic expansion.
Scope and Limitations of the Study
This study examines Nigeria’s macroeconomic data from 2020 to 2024. Limitations include isolating the effects of GDP growth from external shocks and measurement challenges in inflation data.
Definitions of Terms
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Inflation: The sustained increase in the general price level of goods and services.
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Economic Growth: An increase in the production of economic goods and services, measured by GDP.
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Nexus: The connection or link between variables.
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