Inflation and Some Unpleasant Fiscal – Monetary Issues in Nigeria: A Reassessment of the Role of Government in the Management of an Economy.

Abstract

Fiscal and monetary issues are linked through money growth in the form of Seigniorage, which provides revenue to the fiscal authority in the management of an inflationary – prone economy. The relationship between these macroeconomic aggregates are well documented in the literature. This study undertakes an empirical assessment of some (un)pleasant fiscal and monetary issues in Nigeria with the main objective of identifying the role of government in the stabilization of an economy. Using data over 1970 – 2013 periods, this study adopts a modeling approach that incorporate both structural and co-integration analysis and found significant relationships between the macroeconomic variables and inflation in Nigeria. It concludes with some far reaching recommendations including minimization of deficit, adoption of robust fiscal adjustment mechanism that could increase revenue and discouraging deficit financing by the Central Bank.

Key words:Fiscal deficit, inflation, money supply co-integration.