Abstract:

This study adopts the concept of stepwise regression analysis with the aim of generating a model to examine the influence of basket of commodities on consumer price index (CPI) in both rural and urban areas in Nigeria. Data used is gotten from the CBN data bank. The result of analysis shows that (housing, water, electricity, gas and other fuel), (food and non alcoholic beverages), (alcoholic beverage, tobacco and kola) (clothing and foot wear), (health), (furnishing and household equipment maintenance), (restaurant and hotels) and (education) are the variables that mostly affect the urban area. Also, for the Rural area, it is observed that (housing, water, electricity, gas and other fuel), (food and non alcoholic beverages), (alcoholic beverage, tobacco and kola), (clothing and foot wear), (health), (furnishing and household equipment maintenance), (miscellaneous goods and services), and (transport) are the variables that contributes significantly. Therefore, the independent variables that have contributed significantly and common to both urban and rural areas are , , , , , and . However, it was noticed that, among the indicators in the basket of commodities, (restaurant and hotels) and (education) have effect only on the urban area while (miscellaneous goods and services) and (transport) were significant in the rural areas only. On this note, the choice of stepwise regression model has really paid off by distinguishing the cause and effect of basket of commodities on CPI for rural and urban areas.