Money Supply Movement and Food Inflation in Nigeria

Yusuff Olatunji Ashiru

Department of Economics, University of Ibadan, Nigeria.


Keywords: Money supply, Growth, Food inflation, Contemporaneous effect, Lagged effect, ARDL model, Nigeria.


Among the major macroeconomic objectives of any nation is to ensure higher economic growth without significant and persistent upward trend in the general price level. No wonder monetary authorities do emphasis low inflation-output growth. In Nigeria, all efforts of the Central Bank of Nigeria (CBN) to achieve single digits inflation over the years have been abortive. Against this background, this paper examines the impact of money supply on food inflation in Nigeria using monthly data between 1996:01 and 2021:12. The augmented Dickey-Fuller test of unit root is to check the stationary of money supply growth and food inflation. Thereafter, an autoregressive distributed lag model (ARDL) model is specified in order to capture both contemporaneous and effects of money supply on food inflation and the model is estimated using the ordinary least squares (OLS) estimation technique. The results reveal that money supply has contemporaneous effect on food inflation. No evidence of lagged effect is found. It is therefore concluded that controlling the growth in money supply is an effective measure to control food inflation.


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