A STATISTICAL ANALYSIS ON THE IMPACT OF INFLATION RATE ON THE ECONOMIC GROWTH OF NIGERIA

This study presents a statistical analysis of the impact of inflation on Nigeria’s economic growth. Using historical data on inflation rate and GDP growth spanning several decades, the research explores the relationship between inflation and economic performance. The study employs correlation and regression analysis using the Ordinary Least Squares (OLS) method to examine how inflation influences GDP growth and to evaluate its significance in explaining fluctuations in economic activity. The findings reveal that the R-squared value is 0.89, indicating that 89% of the variation in Nigeria’s GDP during the study period is explained by the independent variables—namely, inflation rate, exchange rate, and interest rate. The adjusted R-squared (0.88) further confirms the robustness of the model. The overall model is statistically significant, with an F-statistic of 78.87 and a p-value of 3.50e-13, suggesting that the independent variables collectively have a strong explanatory power over GDP. The exchange rate coefficient (370.291) is positive and statistically significant (p < 0.0001), implying that a depreciation of the naira is associated with increased GDP, likely due to export stimulation. However, the interest rate (-243.727, p = 0.7555) and inflation rate (-25.0368, p = 0.9016) both exhibit negative but statistically insignificant coefficients. This indicates that while inflation and interest rate tend to reduce economic growth, their effects are not strong enough to be considered statistically meaningful. The study concludes that inflation does not have a significant direct impact on Nigeria’s economic growth within the observed period. It also recommends policy measures aimed at mitigating the adverse effects of inflation while promoting sustainable economic development.