An Analysis of the Effect of Inflation on GDP and Consumer Price Indices in Nigeria
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Background of the Study
Inflation has a direct impact on the overall economic performance and the cost of living in any country. In Nigeria, inflation influences both GDP and consumer price indices (CPIs), which are critical measures of economic well-being. High inflation can erode purchasing power and distort economic growth figures, while moderate inflation is often associated with a growing economy (Adeyemi, 2023). The relationship between inflation, GDP, and CPIs is complex; rising inflation may signal overheating in some sectors, whereas controlled inflation may be indicative of steady economic expansion (Okoro, 2024). Recent empirical research has highlighted that understanding these dynamics is essential for formulating effective monetary and fiscal policies that ensure economic stability (Balogun, 2025). This study aims to analyze the effect of inflation on GDP and CPIs by examining historical data, policy interventions, and market responses, thereby providing insights into how inflationary trends shape the economic landscape in Nigeria.
Statement of the Problem
Nigeria continues to grapple with high inflation rates that adversely affect GDP growth and consumer purchasing power. The persistent rise in inflation has led to distorted CPIs and undermined real economic progress (Adeyemi, 2023). Policymakers face challenges in balancing inflation control with stimulating economic growth, as the effects of inflation on GDP and CPIs are not fully understood (Okoro, 2024; Balogun, 2025).
Objectives of the Study
- To examine the impact of inflation on GDP growth.
- To analyze the effect of inflation on consumer price indices.
- To recommend policy measures for mitigating inflation’s adverse impacts on the economy.
Research Questions
- How does inflation affect GDP growth in Nigeria?
- What is the relationship between inflation and consumer price indices?
- Which policy interventions can stabilize inflation and support economic growth?
Research Hypotheses
- High inflation negatively affects GDP growth.
- Rising inflation leads to increased consumer price indices.
- Effective inflation control policies result in improved economic performance.
Significance of the Study
This study is significant as it examines the critical impact of inflation on GDP and consumer price indices in Nigeria. The findings will provide valuable insights for policymakers seeking to balance inflation control with economic growth, ultimately promoting a more stable economic environment (Adeyemi, 2023; Okoro, 2024; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to analyzing the effect of inflation on GDP and CPIs in Nigeria. It focuses exclusively on inflation-related variables without incorporating other external economic influences.
Definitions of Terms
• Inflation: A sustained increase in the general price level of goods and services.
• GDP: The total market value of all goods and services produced in a country.
• Consumer Price Indices (CPIs): Measures that examine the weighted average of prices of a basket of consumer goods and services.
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