Abstract

ARIMA MODELING AND FORECASTING OF CONSUMER PRICE INDEX (CPI) IN NIGERIA

Anas Ibrahim and Sam Olu Olagunju

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For any economic agent to formulate effective policy, it must take into consideration the general increase in price level of goods and services within a period of time. Due to such increase in the general price level of basket of goods, there is need to conduct proper investigation on Inflation in Consumer Price Index (CPI) in Nigeria. This research work is carried out using ARIMA modeling approach to obtain the best model for the Inflation on Consumer Price Index in Nigeria and forecast its probable future values. Monthly inflation figures in CPI were collected spanning from 2009:01 to 2019:12 to build the model. Inflation was found to be integrated of order one and follows ARIMA (2,1,2) order. Inflation was predicted comparing the log of the original CPI data on December, 2019 with the predicted one for December, 2023. It is therefore recommended that appropriate measures should be put in place to prevent future inflation because the model suggests that, inflation has a long trending upward memory and it will take a long period of time to be in a stable state. Keywords: Inflation, Consumer Price Index (CPI), ARIMA, ACF, PACF, Box-Jenkins, Differencing method, forecasting.

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