Investigating the Effects of Inflation on Welfare: A Study of Selected Non-Income Welfare Indicators in Nigeria

Abstract

Nigeria is currently experiencing high rates of inflation. This is driven by conditions which include rising prices globally and domestic factors such as overheating economy and removing of fuel subsidies by the federal government. While provision of quality Education and Health services to the people is key to improving their well-being, a healthy and skilled human capital is required for both growth and human development. Accordingly, the paper investigated the effects of inflation on nonincome welfare indicators, particularly, Education and Health indicators in Nigeria. The study used an empirical analysis employing annual time series data sourced from the World Bank Development Indicators (WDI, 2023) from 1986 to 2021. The study's contribution to the existing knowledge differs from other studies and took a development perspective rather than other researches commonly relating inflation and growth. The findings indicate that inflation has adverse effects on non-income indicators represented by Education and Health. Inflation reduces the non-income welfare, particularly the primary school enrolment and average life expectancy. These results suggest that, as the rate of inflation increases, the welfare of Nigerians decreases. Meaning, more Nigerians would fall into poverty as their welfare decline and theirlife span may be shortened. The paper recommends the federal government should focus more on macroeconomic policies that curtail inflationary pressures, the independence of CBN combined with practical and data-driven monetary policymaking to sustenance, the objectives of price stability, and fiscal discipline should be sustained to avoid undue aggregate demand pressures which drive up prices. Further, there should be monitoring and evaluating progress of the relief measures put in place to cushion the negative effects of fuel subsidy removal.