The annual inflation rate in nigeria rose for the seventh straight month to 12. Nov 20, 2019 nigerias inflation has been higher than the average for african and subsaharan countries for years now, and even exceeded 16 percent in 2017 and a real, significant decrease is nowhere in. It intends to examine the impact of inflation targeting on economic growth in nigeria, within the period. Integrated inflation targeting another perspective from the.
Jul 10, 2019 inflation targeting is a monetary policy where the central bank sets a specific inflation rate as its goal. Apr 26, 2009 this paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have adopted over the last one decade. Therefore, it is possible that the impact of inflation targeting on inflation and on other macroeconomic variables may arise through its effects on inflation expectations and on the expectationsformation process. In nigeria, inflation targeting has been accepted as the principle guiding monetary policy in the government and cbn. One of the features of an inflationtargeting framework is the greater degree of transparency it brings to monetary policy. The study suggests that a more flexible inflation rate, increased money supply, access to credit and a modest but upward adjustment to capital and recurrent expenditure have. The central bank of nigeria cbn targets singledigit inflation rates as the desirable limit of inflation. Inflation targeting as a monetary policy in nigeria. Nigeria crawled into 2009 with double digit inflationary rate, as concerns mount that the regulatory authorities are failing the economy. Formal inflation targeting is still uncommon in african countries, with only south africa and ghana having officially adopted the framework at the current time. Inflation targeting and economic growth nexus in nigeria hrmars. Previous study was also consulted to enrich the work.
The results indicate that, money supply is one of the major causes of inflation in nigeria. Advantages and disadvantages of inflation targeting 12 2. Inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation. Inflation targeting monetary policy, inflation volatility and. Unlike the 2008 that was ushered in with a singledigit. Inflation targeting, as a formal monetary policy regime, was first introduced in new zealand in 1990 and has since been adopted by numerous countries around the world. The of this publication is vested in the central bank of nigeria.
Oconnell1 january 4, 2010 in an inflation targeting it framework, the central bank commits to a publicly announced numerical range for inflation, subordinates other intermediate targets, and institutionalizes its commitment through a set of mechanisms that emphasize. The study examined inflation targeting economic growth nexus in nigeria, with the aim of imbibing the useful lessons and avoiding the pitfalls from crosscountry experiences. Inflation can only be reduced to the barest minimum by increasing output level gdp. Iosr journal of humanities and social science iosrjhss volume 20, issue 11, ver. Nigerias inflation has been higher than the average for african and subsaharan countries for years now, and even exceeded 16 percent in 2017 and a real, significant decrease is nowhere in.
Inflation targeting framework south african reserve bank. Inflation targeting and economic growth in nigeria semantic. Central bank of nigeria 33 tafawa balewa way central business district p. Inflation targeting is a monetary policy strategy in which central bank estimates and makes public a target inflation rate and then, attempts to steer actual inflation towards the target through the use of other key macroeconomic. Proposed inflation targeting or mistargeting in nigeria. The discussion is conducted income countries from the perspective of middle. Scope of the study this project covers a period of 21 years, that is from 1980 to 2011.
Inflation targeting is a monetary policy strategy in which central bank estimates and makes public a target inflation rate and then, attempts to steer actual inflation towards the target through the use of other key macroeconomic variables such as interest rate changes and other monetary tools. The study employed descriptive approach to the study with data sourced from the central bank of nigeria statistical bulletin of various issues. Monetary policy instruments, target and goals 6 list of figures figure 1. Since the introduction of the inflation targeting monetary policy, the country largely succeeded in containing. Inflation management is one of the most challenging macroeconomic objectives capable of frustrating every pragmatic effort aimed at achieving sustainable economic growth. Integrated inflation targeting another perspective from. Inflation targeting as a monetary policy in nigeria semantic scholar. This study examines inflation and inflation targeting visavis economic growth in nigeria. Effect of inflation on the growth and development of the.
New cbn study discredits inflation targeting model for. Though inflation rate is not new in the nigerian economic history, the recent rates of inflation have been a cause of great concern to many. Bank of nigeria has been contemplating switching to inflation targeting as a monetary policy framework. Journal of economics and sustainable development iiste. Ordinary least square method and ttest was used to test the variables most likely to impact on economic growth in nigeria due to inflation. Under the monetary targeting framework in an indirect approach, the liquidity level that is consistent with macroeconomic objectives is determined using base money bm as the operating target, m2 as the intermediate target while inflation is the ultimate target. Longlasting episodes of high inflation are often the result of lax monetary policy. Objectives of the study the broad objective of this study is to analyze the impact of inflation targeting on nigeria s economic growth, while. Being a paper presented at a workshop on inflation targeting held at the central bank of nigeria, abeokuta, ogun state, nigeria. Kumo 2015 assessed the impact of inflation targeting monetary policy, inflation volatility and economic growth in south africa between 1960 and 20, using garch model on quarterly data.
Why have all the policies used by cbn are unable to target the rate of inflation on nigeria s economic growth. Monetary policy and inflation targeting in nigeria iiard. The central bank does this to make you believe prices will continue rising. Gliding on a wind of change, focus on european economic integration, vol. This implies that inflation in other countries are imported to the country through high demand import of goods and service by many nigerians. It as a potent framework for monetary policy in both developing and developed economies. There is evidence of growing concern regarding south africas. Inflation targeting has been adopted in a number of. However, contents may be cited, reproduced, stored or transmitted without permission. Macdonald 2006 monetary transmission in central and eastern europe. Towards inflation targeting framework for monetary policy in nigeria. The assumption is that the best that monetary policy can do to support longterm growth of the economy is to maintain price stability, and price stability is achieved by controlling inflation.
Effectiveness of monetary policy on inflation targeting in. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have. Inflation targeting and economic growth in nigeria. Even with so many reforms in the central bank and the national bureau of statistics, timely and reliable data availability remains an issue in nigeria. D department of financial management technology fmt school of management technology. Therefore, the paper recommends that government should use exchange rate as inflation targeting instrument in nigeria to reduce the level of imported inflation for economic growth in nigeria. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy framework that several emerging markets have adopted over the last one decade. The appropriateness of inflation targeting in south africa is examined. Inflation targeting is a monetary policy where the central bank sets a specific inflation rate as its goal. The application of monetary policy strategies toward achieving. It spurs the economy by making you buy things now before they cost more. Inflation targeting framework for monetary policy in nigeria. Second, nigeria is absent from the list of countries that have adopted inflation targeting as a monetary policy framework, while south africa and ghana are the only countries in africa that have adopted inflation targeting.
Indeed, inflation targeters have argued that symmetrical inflation targeting helps central banks to stabilize real output, because in the face of a weak economy, an inflation targeter can ease more aggressively without being worried that the easing will cause inflation expectations to rise. The paper recommends inflationary targeting at single digit. Pdf is nigeria ready for inflation targeting semantic. In the cbn report titled relevance of inflation targeting for developing countries in the new normal.
It was the highest inflation rate since april of 2018, largely driven by the effects of the border closure and the new vat tax rate. Appropriateness of inflation targeting in south africa. But recent policy indication shows that the central bank of nigeria cbn may have softpedaled in the pursuit of fullfledged inflation targeting for the country. Inflation targeting is a monetary policy framework in which the central bank announces an explicit inflation target and implements policy to achieve this target directly. An analytical study of the impact of inflation on economic. Kumo is country economist, at the african development bank, south africa regional office, pretoria. Under the monetary targeting framework in an indirect approach, the liquidity level that is consistent with macroeconomic objectives is determined using base money bm as the operating target, m2 as the. Inflation targeting has no significant impact on the economic growth in nigeria. This article examines inflation with reference to nigeria.
An analytical study of the impact of inflation on economic growth in nigeria 19702016. South africa has adopted flexible inflation targeting, wherein considerations for other macroeconomic variables are prioritized. Inflation targeting monetary policy, inflation volatility. Inflation targeting and economic growth nexus in nigeria. Inflation targeting monetary policy stance of nigeria was examined using taylor policy rule. This paper evaluates whether nigeria is ready to adopt inflation targeting it, a monetary policy. What are the impacts of inflation targeting on nigeria s economic growth. Methodologically, the study employed the twostage least squares 2sls techniques in examining the impact of inflation targeting for. E42,e43,e47,e52,e58 abstract inflation targeting is a monetarypolicy strategy that is characterized by an announced numerical inflation target, an implementation of monetary policy that gives a major role to an inflation forecast and has. Pre conditions of inflation targeting baser, sefika ma, department of economics supervisor. Integrated inflation targeting iii abstract this book provides a thorough assessment of recent experiences with inflation targeting it, the challenges it has faced since the global financial crisis, and ways in which these challenges have been, or should be, addressed.
One of the features of an inflation targeting framework is the greater degree of transparency it brings to monetary policy. Various evaluations have attested to the success of inflation targeting. Inflation targeting monetary policy, inflation volatility and economic growth in south africa wolassa l kumo1 1 wolassa l. For instance, chile and brazil had inflation rate of 26 percent and 19 percent, respectively, prior to it adoption and they have had a success story on inflation targeting. Inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the mediumterm and announces this inflation target to the public. Central bank of nigeria monetary policy frameworkcont. The assumption is that the best that monetary policy can do to support longterm growth of the economy is to maintain price stability. May 01, 2020 inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation.
Inflation targeting with dynamic time series modelling the nigerian case olanrewaju i. Some researchers argued that, monetary policy is an effective policy measure to achieve inflation targeting, these researchers include gbadebo and muhammed 2015, herberger 1978, mccallum. Pdf is nigeria ready for inflation targeting semantic scholar. Merits of inflation targeting in south africa 16 2. Pdf inflation targeting monetary policy rule in nigeria. Generally, inflation targeting is a policy in which an estimated inflation target is made public and deliberately pursued using the instruments of monetary management such as interest rate to steer actual inflation towards the desired policy target. Inflation targeting in nigeriaenglama munich personal repec. For example, while most inflationtargeting central banks use a shortterm interest rate as their instrument, inflation targeting can also be implemented using the reserve money instrument currently employed by the cbn. In the last decade, the cbn were able to achieve single digit. This paper attempted to critically analyze the basic issues, problems and prospects germane to the adoption of inflation targeting as a monetary policy framework for nigeria. Yemitan abstract in recent times, inflation figures used by policy makers and investors are usually at lag one i. Nigeria inflation rate 19962020 data 20212022 forecast. Inflation targeting and economic growth in nigeria semantic scholar.
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