An examination of the determinants of inflation in Nigeria: Evidence from monetary policy adjustments by the CBN
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Background of the Study
Inflation remains a persistent economic challenge in Nigeria, affecting both consumer purchasing power and overall economic stability. The Central Bank of Nigeria (CBN) has implemented various monetary policy adjustments over the years in an effort to control inflation and stabilize the economy. These measures include interest rate modifications, open market operations, and regulatory interventions designed to influence money supply (Abdul, 2023). Despite these efforts, inflationary pressures continue to impact the cost of living and economic performance. Several factors such as fiscal deficits, exchange rate volatility, and external shocks also contribute to the inflationary trend (Bello, 2024). Recent research has underscored the importance of understanding the interplay between monetary policies and underlying economic determinants to craft effective strategies for inflation control (Chinwe, 2025). Moreover, the dynamic nature of the global economic environment necessitates continuous evaluation of policy measures to ensure their relevance and effectiveness. This study examines the determinants of inflation in Nigeria with a specific focus on monetary policy adjustments by the CBN, aiming to disentangle the complex interactions between policy interventions and inflationary outcomes. By analyzing historical data and recent trends, the study provides insights into how monetary policy can be optimized to achieve price stability in a volatile economic landscape.
Statement of the Problem
Despite sustained efforts by the Central Bank of Nigeria to control inflation through monetary policy adjustments, inflation remains a major economic challenge. The persistence of high inflation rates indicates that policy measures may not be fully addressing the underlying determinants driving price increases (Abdul, 2023). Factors such as fiscal mismanagement, global commodity price fluctuations, and external economic shocks exacerbate the situation, rendering conventional monetary tools less effective (Bello, 2024). This persistent inflation undermines economic stability, reduces real income, and hampers long-term growth prospects. The study seeks to critically examine whether current monetary policies adequately target the root causes of inflation and to identify gaps in policy implementation that contribute to the sustained inflationary environment (Chinwe, 2025).
Objectives of the Study
1. To analyze the impact of CBN monetary policy adjustments on inflation.
2. To identify the key determinants influencing inflation in Nigeria.
3. To recommend policy measures for more effective inflation control.
Research Questions
1. How do monetary policy adjustments by the CBN affect inflation rates in Nigeria?
2. What are the major determinants contributing to persistent inflation?
3. How can monetary policies be improved to better manage inflation?
Research Hypotheses
1. CBN monetary policy adjustments have a significant impact on controlling inflation.
2. External shocks and fiscal imbalances are major determinants of inflation.
3. Policy reforms that address structural issues can lead to more effective inflation control.
Significance of the Study (100 words)
This study is significant as it provides an in-depth examination of the determinants of inflation in Nigeria, with a focus on monetary policy adjustments by the CBN. The findings will offer critical insights for policymakers aiming to design more effective strategies for price stabilization. By identifying both the strengths and weaknesses of current monetary policies, the research contributes to the development of targeted interventions that can enhance economic stability and promote sustainable growth.
Scope and Limitations of the Study
The study is limited to the examination of inflation determinants in Nigeria, specifically focusing on monetary policy adjustments by the Central Bank of Nigeria. It does not extend to other economic policy instruments or international influences.
Definitions of Terms
• Inflation: The rate at which the general level of prices for goods and services is rising.
• Monetary Policy: The process by which a central bank manages a nation’s money supply.
• Central Bank of Nigeria (CBN): The institution responsible for regulating the country’s monetary policy
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