Impact of Inflation on Industrial Development in Nigeria

Abstract

The study examined the impact of inflation on industrial development in Nigeria between 1990-2021 Annual time series data on Index of Industrial Production, Inflation rate, interest rate, investment rate, exchange rate, money supply, personal consumption expenditure, real Gross Domestic Product and Oil Price were used. Inflation rate, interest rate, investment rate, exchange rate, money supply, personal consumption expenditure, real Gross Domestic Product and Oil Price were the independent variables, while Index of Industrial Production (a stand-in for industrial development) was the dependent variable. Via the use of the Autoregressive Distributive Lag econometric technique, the study's results indicate that real Gross Domestic Product, interest rates, and inflation rates all significantly influenced the economy's industrial development. While inflation and interest rate had significant negative impact on industrial development, real Gross Domestic Product had significant positive impact. Other supporting explanatory variables such as investment rate, exchange rate, money supply, personal consumption expenditure and oil price were not statistically significant in influencing industrial development within the study period. Therefore, the study suggests that the government and monetary authorities support the expansion of the industrial sector by providing producers with reasonably priced loans. In the long run, this can reduce inflationary pressures in the economy by boosting domestic manufacturing capacities and increasing both the domestic and international supply of commodities.