The Impact of Combined Economic Factors on Consumer Price Indices in Nigeria: A Multivariable Analysis
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Background of the Study:
Nigeria’s consumer price index (CPI) is influenced by a host of economic factors that interact in complex ways. Recent studies suggest that variables such as GDP growth, inflation, exchange rate fluctuations, and Foreign Direct Investment (FDI) inflows collectively determine the trajectory of consumer prices (Afolabi, 2023). A multivariable analysis that integrates these factors is essential to understand how shifts in one indicator might be offset or amplified by changes in another. For example, robust GDP growth may create upward pressure on prices through increased demand; however, if accompanied by effective monetary controls and FDI that boosts productivity, the net impact on CPI can be moderated (Babatunde, 2024). The integration of these economic indicators helps in formulating policies that ensure price stability while supporting economic growth. Moreover, understanding these interactions is critical in an economy marked by external shocks and domestic policy reforms. Recent fiscal measures and monetary policy adjustments have aimed at balancing growth with price stability, yet the precise relationship among these variables remains underexplored. This study, therefore, intends to conduct a multivariable analysis to quantify the combined impact of economic factors on Nigeria’s CPI. By leveraging recent empirical data and advanced econometric models, the research seeks to offer nuanced insights into policy effectiveness and economic resilience (Chinaza, 2025).
Statement of the Problem:
Despite ongoing policy interventions, Nigeria continues to face volatile consumer price indices. The challenge lies in the interdependency of economic factors where isolated policy measures may fail to address the compounded effects of GDP fluctuations, inflation, and FDI variability. The current literature offers limited insight into how these factors interact to shape the CPI. Consequently, policymakers lack a comprehensive framework to predict and manage consumer price dynamics, which in turn hampers effective fiscal and monetary planning (Ibrahim, 2023).
Objectives of the Study:
- To assess the combined impact of GDP, inflation, exchange rate fluctuations, and FDI on Nigeria’s CPI.
- To develop an econometric model that captures the interdependencies among these economic factors.
- To provide policy recommendations for enhancing price stability.
Research Questions:
- How do GDP, inflation, exchange rates, and FDI collectively affect Nigeria’s CPI?
- Which economic factor exerts the most significant influence on consumer prices?
- What policy interventions can effectively moderate the combined impact of these factors?
Research Hypotheses:
- H1: Combined economic factors have a statistically significant impact on Nigeria’s CPI.
- H2: Inflation exerts a dominant influence on the CPI compared to GDP and FDI when other factors are controlled.
- H3: Integrated policy measures that address multiple economic variables simultaneously are more effective in stabilizing CPI.
Significance of the Study:
This study is significant as it provides a comprehensive multivariable analysis of the determinants of Nigeria’s consumer price indices. The findings will aid policymakers in designing integrated fiscal and monetary strategies that account for the interplay among key economic variables. By identifying which factors are most influential, the research offers actionable insights that can lead to more stable consumer prices and enhanced economic resilience (Okeke, 2024).
Scope and Limitations of the Study:
The study is confined to the examination of key economic variables—GDP, inflation, exchange rates, and FDI—and their combined effect on Nigeria’s CPI. It does not extend to other potential factors such as international commodity prices or political influences.
Definitions of Terms:
• Consumer Price Index (CPI): A measure that examines the weighted average of prices of a basket of consumer goods and services.
• FDI: Foreign Direct Investment, representing cross-border capital inflows into Nigeria.
• GDP Growth: The increase in the economic output of Nigeria over a given period.
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