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CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Inflation can be defined as the persistence rise an prices of goods and service due to the volume of money in circulation.  This is an increase in the money and credit relative to available goods and service resulting in a general price level.  In order to observe that there is inflation there should be a rise in the volume of money credit.  This rise  must exceed the available goods and service an the country.  There should a the  substantial and centurial increase in the gene price level of goods and services. Rise in prices may be of various magnitudes accordingly different names have been given to inflation depending upon the rate of rise in prices .if the prices of goods and service rise this in just saying that the value of money has fallen because less goods and service can now be obtained in exchange for a given sum of money.  Prices  vary inversely with the value of money.  The value of money is this shown by the level of prices a general fall in process indicates rise on the value of money. The price of a commodity is the amount of money that has to be paid for it.  The value of money is the quality of goods and service it will buy.  The market price is the indicator of relative value of goods and service in terms of money.

1.2   STATEMENT OF PROBLEM

Despite the fact that inflation increase investment which creates employment of production resources and hence greater output there are indications that discourager savings thereby increasing the risk of holding raw each and reducing the value of money inflation will lead to a fall in the burden of national debt by making a fixed debt amount to lose its purchasing power. During inflationary  periods the value of money which is the purchasing power of money Falls inflation increase the earnings  of business share holders and other whose income are fixed in money terms but inspite of these there are complained that it reduced the standard of living of the people whose income are fixed  thus increasing their cost of  education welfare and culture facilities available.  This situation however makes it difficult for the poor masses with fixed income difficult to survive in the economy.

Inflation will also lead to a balance of payment deficit.  The rise in the prices of home goods will make more consumer goods to be imported thereby making the county to spend more foreign currency that what it will received abroad from exportation.  However since the real value of money fall during inflationary period people prefer to spend it rather than investment.  Also debtors gain while creditors lose because the burden of debt falls and the money loses its purchasing power.

1.3   OBJECTIVE OF THE STUDY     

The study embraces the causes consequences and control of inflation in the Nigerian economy. The negative effective of inflation has indeed remained a stagnant towards the economic development.  However the main objective of the study are as follows:

To fund out the causes of inflation in the Nigerian economy.

To known its influence on the Nigeria economy

To determine to a great extent how inflation  affect an economy

To  fund out the means and provide possible solution that can be adopted in solving the problems of inflation in the Nigerian economy 

The study will also educate the masses on the need to minimize the problem associated with inflation in a bid to have an economic boom instead of doom.

To give suggestions on how to curbs inflation through governmental agencies and individual 

1.4   SIGNIFICANCE OF THE STUDY

The significance of the study will be of immense importance to the following groups

The researcher

To other researchers.

To the central bank of Nigeria

To the government and  the public at large.

To the researcher  it will enable her to obtain the award of ordinary national diploma {OND} and other researchers will use it as guide and base fro consultation of their research work.  The significance of the study to the CBN is to understand and strengthen our economic policies to curb the inflationary trend in the country.  This study will also enable the citizens adjust  to the demand of economic policies which are  geared towards funding a lasting solution to these inflation so as to promote economic policies that  favour our nation.

1.5   DEFINITION OF TERM

i.Inflation: This can be  defined as the persistence rise in the  prices of goods  and service due to the volume of money an circulation. It is also a process whereby too much money is chasing few goods.

ii. CBN is the central bank of Nigeria which is also known as the apex bank that is charged  with the responsibility of managing the cost volume availability direct and creation of money and credit in an economy with the view of achieving some desired economic objectives.

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