KOGI STATE
Faculty of Management Sciences
Journal of MANAGEMENT
ISSN: 3212 - 3122
AN ANALYSIS OF FACTORS RESPONSIBLE FOR INFLATION DYNAMICS IN NIGERIA: PRINCIPAL COMPONENT ANALYSIS
Agya Atabani Adi; Amadi W. Kingsley & Nyiputen Ishaku Rimamtanug
Abstract
The paper employed principal component analysis to identified factors responsible for inflationary pressure in Nigeria, spanned second quarter 2015 to first quarter 2018. Several well recognized criteria for factorability of a correlation were used. It was found that 19 items correlated at least 0.4 with other factors and sample is adequate and sphericity was significant. The first three PCs explained 94.30 percent of the total variability in inflation. The first component explained 53.59 percent; second component 27.79 percent of the variance while third component account for 10.92 percent of the variance. Component 1 is denoted as Food crop factor, Component 2 is energy factor while component 3 is denoted as Cash crop factors. Hence, we conclude that inflation in the period under reviewed is driven by increase in food crops price, energy prices and cash crop price were the major factors that fueled recent episode of inflation in Nigeria. We recommend that Government should take proactive step to increase food production on sustainable bases. Energy price should be cut down as short term measure while a sustainable measure aim at increased local production of petroleum products and Government should rapidly improve power generation and better distribution for commercial and domestic uses should be put in place
Keywords
Inflation factors, Inflation dynamics, Principal Component Analysis, Nigeria Economy.
Full Article
UNIVERSITY, ANYIGBA
