Modeling and Forecasting Inflation Dynamics in Nigeria: A Time Series Approach

Abstract

This study utilized an Auto Regressive Integrated Moving Average (ARIMA) Model to forecast Nigeria’s inflation rate, leveraging monthly data from January 2015 to May 2024 to predict trends from June 2024 to September 2027. The ARIMA model, identified as (3,2,2)(0,0,2)(12) based on the Akaike Information Criteria (AIC), forecasts a persistent upward trend in inflation, with increasing uncertainty over time. The findings suggest that Nigeria’s inflation rate will continue to raise steadily over time next three years, posing significant economic challenges, including decreased purchasing power and unstable economic growth. The study’s results underscore the importance of prudent economic policy making to mitigate the effects of inflation. To manage the inflationary pressures, the study suggests implementing monetary tightening measures, maintaining exchange rate stability, and conducting regular economic monitoring to inform timely policy interventions. The research demonstrates the utility of ARIMA models in informing policy decisions and highlights the need for continued vigilance in economic management. By providing valuable insights into future inflation trends, the study contributes to the development of effective economic policies that promote stability and growth in Nigeria. The study’s findings have implications for policymakers, economists and stakeholders seeking to understand and address the challenges posed by inflation in Nigeria.