Seasonal ARIMA modeling of inflation in Nigeria
Seasonal ARIMA modeling of inflation in Nigeria

Summary/Abstract: The success of monetary and fiscal policies in controlling inflation rates relies largely on the availability of accurate inflation forecasting models. Thus, updated models that require seasonality are required. This study applies the Seasonal Autoregressive Integrated Moving Average (SARIMA) process to model the consumer price indices in Nigeria, specifically headline, food and core inflation. The study analyses monthly inflation rate data for the period from January 2003 to December 2023, obtained from the Central Bank of Nigeria’s website. The findings of the study identify the best-fitting SARIMA models for each inflation measure. The SARIMA (1,1,0)(2,0,1)12 model is selected as the most appropriate for headline inflation, while the SARIMA(2,1,2)(2,0,2)12 and SARIMA(1,0,1)(2,0,1)12 models are chosen for food inflation and core inflation, respectively. Caution is then required when applying SARIMA models in forecasting inflation, with emphasis on the importance of considering other relevant economic and socio-political factors that may influence inflation trajectories.

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