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The P-star model performance in predicting inflation renders it a valuable tool in analyzing dynamic behavior of prices. This study tests the performance of the P-star model in Nigeria with a view to ascertaining its usefulness in predicting price movement. Using quarterly data obtained from the Central Bank of Nigeria statistical Bulletin over the period 1970 to 2011, we obtained estimates of the price-gap, velocity-gap and output-gap model. The result obtained shows the usefulness of the price-gap model in explaining and predicting inflation in Nigeria. [ABSTRACT FROM AUTHOR]