EFFECT OF INFLATION ON THE ECONOMIC DEVELOPMENT OF EDO STATE (A CASE STUDY OF OREDO LOCAL GOVERNMENT AREA OF EDO STATE)
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EFFECT OF
INFLATION ON THE ECONOMIC DEVELOPMENT OF EDO STATE (A CASE
STUDY OF OREDO LOCAL GOVERNMENT AREA OF EDO STATE)
ABSTRACT
This study
has been designed to investigate the effects of inflation on the economic
development of Edo State. Oredo Local Government Area of Edo State was used as
a case study. The research study was undertaken with the aim of providing
lasting solutions which will help the public and private sectors of the economy
to be combat ready to eradicating inflation. In the process of carrying out
this study, questionnaires were administered to elicit responses from
respondents in four locations. To enhance the effective implementation of the
study, three (3) hypotheses were formulated, they include:
Inflation occurs when demand is greater
than the supply of goods and services.
The financial indiscipline of the
government is directly related to the inflationary position of the economy of
Edo State.
The devaluation of the Nation’s currency
(naira) has a negative effect on the economy.
The data
collected were analyzed and interpreted. The findings were converted into
simple percentage as shown in the tables. The hypotheses were conceived on the
basis of the findings. The alarming inflationary trend in Edo State has taken
over the economy. The naira has lost its value in the labour market, prices of
goods and services are on the increase life has become meaningless, worthless,
and miserable for the masses. It is therefore important for all hands to be on
deck to arrest the ugly trend of inflation in Edo State. The government and the
citizens should join hands together to fight the malaise and cankerworm of the
ugly trend of inflation in Edo State having achieved this; it will become an
economic landmark of advancement, progress, development and breakthrough in all
ramifications.
TABLE OF
CONTENT
Chapter One
Introduction
Statement of problem
Objective of the study
Hypothesis
Significance of the study
Limitation of study
Chapter
Two
Literature Review
Meaning of inflation
Theories of inflation
Effects of inflation of Edo State economy
Control of inflationary trend in Edo State
Chapter
Three
Methodology
Research design
Population of the study
Sample of the study
Sampling technique
Research instrument
Data analysis
Chapter
Four
Discussion of results
Presentation and analysis of data
Presentation of analysis
Chapter
Five
Summary of findings, Recommendations and
Conclusion
Summary of findings
Findings
Recommendation
Conclusion
References
Questionnaires
CHAPTER ONE
INTRODUCTION
BACKGROUND
OF THE STUDY
Inflation can be defined as persistent
rise or increase in the general level of price. Inflation is an economic
situation whereby so much money is chasing few goods. It is a problem which
affects every country of the world especially developing countries like Nigeria
which goes a long way to affecting the states. Inflation is the most serious
problem prevailing I our economy today, which seems to be assuming an economic
epidemic dimension. As everybody is struggling to survive, prices of goods and
services are at a rapid alarming rate of increase. The historical perspective
of inflation can be narrowed down to the 1950s and 1960s. a decade before this
period was the general inflationary period in the world. It was at its peak in
the 1960s when the Nigeria civil war ended as all the resources of the nation
were diverted towards the production of arms and ammunitions (weapons of war).
Able bodied men who would have engaged in farming were as a result of this, the
agricultural sector of the economy suffered, thus the few available goods were
distributed in favour of those in the upper class.
The product of this was unemployment
that starved thousands of youths since industries were shut down. There was a
considerable increase in government expenditure which was not equated with
taxation as many of the working age were unemployed. Consequently, government
had to pay a large part of the expenses by minting (creating/printing) more
money and borrowing from banks. Thus the volume of money in circulation
increased without no corresponding increase in goods and services. We all now
feel the bite since food and non-food items have continued to increase, some
consumers notable the poor feel the effect most. Most households in Edo State
are made up of low income earners who have to contend with the continuing
inflationary trend. Hence, there is need to study and provide a pragmatic
solution from the basis of this research.
The word inflation rings a bell in the
market economics of the world. It is a monster that threatens all economics
because of its undesirable effects. The problem of inflation surely is not a
new phenomenon. It has been a major problem in the country over the years.
Inflation is defined as a generalised increase in the level of price sustained
over a long period in an economy (Lipsey and Chrystal, 1995). Inflation is a
household word in many market oriented economics. Although several people,
producers, consumers, professionals, non-professionals, trade unionists,
workers and the likes, talks frequently about inflation particularly if the
malady has assumed a chronic character, yet only selected few knows or even
bother to know about the mechanics and consequences of inflation.
After an
appreciable economic performance in the early 1970s, the Nigeria economy
witnessed some anxious moment in the late 1970s to mid 1980s. Severe pressures
built up in the economy mainly because of the expansionary fiscal policy of the
federal government during these years. This was accompanied by high monetary
expansion as the huge government deficit was financed largely by the Central
Bank of Nigeria. This was exacerbated by the transfer of government sector
deposits to the banks and the resultant increase in their free reserves with
adverse consequences on the general price level. The inflationary pressure was
further aggravated by high demand for imports of both intermediate inputs and
consumer goods due to over valuation of the naira which made imports relatively
cheaper than locally manufactured goods. In this case, the impediments to
development may be referred to as cost. Economics theory, however, postulates
that for the profit to be maximised, cost should be minimised. One of the main
cost is inflation, which has turned into a canker worm eating deep into the
nation’s path of economic progress. However, as fiscal discipline was restored
in the second half of 1999, the pressures on the exchange rate and domestic
prices moderated significantly. The economy faced renewed pressures and some
uncertainty towards the end of the year as the C.B.N gradually relaxed its
tight monetary policy.
Undoubtedly
one of the macroeconomic goals which the government strives to achieve is the
maintenance of stable domestic price level. This goal is pursued in order to
avoid cost of inflation or deflation and the uncertainty that follows where
there is price instability (Salam et al, 2006). The effects of inflation on
economic growth will be examined bearing in mind that a country will grow
faster in real terms if inflation is reduced to a barest minimum. Perhaps it
should be mentioned here that inflation is not incompatable with growth.
STATEMENT OF
PROBLEM
Inflation is undesirable. This is due
to its negative and disastrous effects on our economy since both the rich and
poor are suffering from it as cost of living is high. This study intends to
investigate the causes and effects of inflation in Edo State. The following
questions are intended to be provided with answers from this study:-
To what extent has inflation put miserly,
anguish and pain in the face of the masses in Edo state?
In what way does the persistent fall in
purchasing power of a unit of nation’s currency causes inflation?
Does the government contribute in any way
to the inflation being experienced in Edo State?
Could scarcity of goods lead to high
prices?
Could inflation be as a result of too much
money in circulation i.e. increase in supply of money?
OBJECTIVE OF
THE STUDY
The objectives of the study are as
follows:-
To ascertain the effects of inflation on
the economy of Edo State.
To determine the effects of inflation on
Edo people.
To ascertain the various measures of
controlling inflation.
RESEARCH
QUESTIONS
For the purpose of this study, the
following research questions have been designed:-
Does Inflation occur when demand is greater
than the supply of goods and services?
Is the financial indiscipline of the
government is directly related to the inflationary position on the economy of
Edo State?
Does devaluation of the nation’s currency
(naira) have a negative effect on the economy?
SIGNIFICANCE
OF THE STUDY
This study is unique because it is
going to be useful to both the rich and poor. The significance of this study
therefore is based on its attempt to make both the general public and
government see the need to contribute their own quota to the fight against
inflation. When the solutions are proffered, policy makers as well as the
government will know what decision to take as regarding inflationary problems.
The researcher therefore hope that this research work will enlighten and open
the eyes of both the citizens and government to see the areas where they have
consciously or unconsciously aided inflation, thus finding solutions to
inflationary problem as there is no problem without solution. The study will
therefore critically x-ray the causes, effects and possible remedies to
inflationary trend in Edo State.
SCOPE OF THE
STUDY
The scope of this study for the
purpose of this research will pose its attention on Edo State considering the
causes, effects and possible solution of inflationary trend and how it affects
the people of Oredo Local Government Area in Edo State. The scope of this study
will focus its attention on market women, street traders, civil servants and
students in Oredo Local Government Area of Edo State.
DEFINITION
OF TERMS
Inflation:
This can be defined as any increase in the money supply; however this can be
regarded as inflation. This can also be seen as persistent in average price
level of goods and services resulting in diminishing purchasing power of a
governmental sum of money. Also when the volume of money in circulation is
greater than the available goods and services so that there is a continuous
tendency for average price level rise.
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