CHAPTER ONE
INTRODUCTION
Economic growth of any country reflects its capacity to increase production of goods and services. The simplest definition of economic growth can be stated as the increase in the Gross Domestic Product (GDP) of that country. Nominal GDP is usually adjusted for inflation factor to reflect real GDP. Interest rate is one of the macroeconomic growth factors; it’s up and down volatility is closely related with inflation rates. Its high or low rates also impact the economic boom (high GDP) and extending to influence economic growth rate. In business fields, it is very important to accurately predict interest rate trends. Many previous studies have assumed that the time series data is stationary and they ignored that non stationary could exist in the variables. This study is a contribution to the existing literature on real growth applied to Nigeria ‘s economy; it will examine the effect of interest rate, inflation, and Real GDP on the real growth rate of Nigeria ‘s economic. Study is concerned to analyze:
– The relationship between Interest rate and inflation rate,
– The relationship between GDP and economic growth rate.
– The Effect of Interest rate, Inflation rate, and R. GDP, on Real Economic Growth Rate.
Samuelson (1973), defines inflation as “a general rising prices for breeds, cars, haircut, rising wages, rent etc. Onwukwe (2003), on his side defines inflation as “a significant and sustained rise in the general price level or a declining value of the monetary units.
The problem created by the rising prices of goods and services has become two difficult for government to solve. During inflationary period, fixed amounts of money buy less quantity of goods and services. The real value of money is drastically reduced i.e the purchasing power of consumers are reduced.
The Impact of rapid inflation growth has led the federal government of Nigeria to adopt several sexual measures of inflation control. Paramount among these measures are monetary and credit policies formulated restore balance of payment to a health; position price and way policies formulated to check the growth of price and income.
Inflation growth became more intensified since later eighty’s, inflation rate was 9.9 percent in 1980, in 1981 it rise to 21.0 percent and 7.6 percent, in 1982. In 1988 it increased to 56.1 percent, and 1989, it was at 42.6 percent in 1992; 57.2 percent in 1993; 55.3 in 2000; it reduced to 27.2 percent and 18.9 percent in 2001 (CBN Bulletin, 2003).
The researcher feels that the Nigerian economy is under surge until adequate measures are adopted to arrest the Impact of inflation on the economy:
Having a view on the Impact of inflation on Nigeria economy and realizing that the problems caused by the Impacts of inflationary growth is becoming unbearable to the citizens and the entire economy, of becomes necessary to critically analyzed the impact of inflation on Nigerian economic growth (1980-2006).