Inflation Dynamics in Nigeria: A Disaggregated Approach
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Date
2025-06-30
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Publisher
Lafia Journal of Economics and Management Sciences
Abstract
This study examines inflation dynamics in Nigeria using a disaggregated approach, focusing on key sectors such as food, energy, housing, water, health, and transport. Employing the Autoregressive Distributed Lag (ARDL) model, the study analyses the determinants of disaggregated inflation and the role of macroeconomic variables in shaping price movements. The findings reveal strong inflation inertia across sectors, with past inflation significantly influencing current price changes. In the food sector, the first lag of food price inflation exerts a dominant effect, while GDP growth negatively impacts food inflation in Nigeria. The energy, housing, and water sectors experience persistent inflationary pressures, but the effects diminish after four months, possibly due to government interventions. Similarly, the transport sector exhibits lagged inflationary effects, with money supply (GM2) and central bank independence (CBI_INDEX) playing crucial roles. The variance inflation factor (VIF) results suggest minimal multicollinearity, while heteroskedasticity tests indicate that inflation in the health and transport sectors is highly sensitive to economic shocks. These findings underscore the need for appropriate policies like enhancement of monetary policy transmission and stabilize food/oil markets while deregulating energy sectors and upgrading infrastructure. Prioritize healthcare supply chain improvements and transport fuel pricing reforms to address sectoral inflation.
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