ECONOMETRIC ANALYSIS OF STAGFLATION AND INDUSTRIAL OUTPUT IN NIGERIA

This study examined the effect of stagflation on industrial output in Nigeria over the period 1991–2025.
Stagflation, characterized by the simultaneous occurrence of high inflation, high unemployment and slow
economic growth, has remained a major macroeconomic challenge confronting the Nigerian economy.
The study specifically investigated the effects of inflation rate, unemployment rate and exchange rate on
industrial output. Annual time series data were obtained from the Central Bank of Nigeria (CBN),
National Bureau of Statistics (NBS), World Development Indicators (WDI) and International Monetary
Fund (IMF) publications. The study adopted an ex-post facto research design and employed the
Autoregressive Distributed Lag (ARDL) estimation technique to analyze both the short-run and long-run
relationships among the variables. The ARDL Bounds Test result confirmed the existence of a long-run
relationship among industrial output, inflation rate, unemployment rate, and exchange rate. The error
correction model revealed an adjustment coefficient of -0.673465, indicating that approximately 67.35
percent of short-run disequilibrium is corrected annually toward long-run equilibrium. The empirical
findings showed that inflation exerts a negative and statistically significant effect on industrial output in
the short run. Unemployment was found to have a predominantly negative effect on industrial output
through its lagged values, although its long-run effect was statistically insignificant. Exchange rate
depreciation exhibited a significant negative effect on industrial output in both the short run and long
run, indicating that exchange rate instability adversely affects industrial productivity in Nigeria. The
study further revealed that stagflation significantly undermines industrial sector performance by
increasing production costs, reducing aggregate demand, discouraging investment and weakening
industrial competitiveness. The study concluded that macroeconomic instability remains a major
impediment to industrial development in Nigeria. It recommended effective inflation control measures,
exchange rate stabilization policies, employment generation programmes and increased investment in
infrastructure to promote industrial productivity and sustainable economic growth.