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Abstract
This study examines the effect of inflationary pressures on household consumption expenditure in Nigeria between 1991 and 2024. Using descriptive statistics and the Auto Regressive Distributed Lag (ARDL) approach, the study investigates the roles of
inflation, exchange rate volatility, and unemployment in shaping consumption dynamics. Unit root and diagnostic tests were applied to ensure robustness, while estimations were conducted with Views. The findings reveal that inflation significantly increases household consumption in the short run but exerts no meaningful long-run effect. Exchange rate volatility and unemployment were found to be insignificant in both the short and long run, reflecting the moderating influence of Nigeria’s informal sector. Overall, the results suggest that while households adjust nominal spending upward in response to short-run price shocks, long-run consumption remains resilient to inflationary, exchange rate, and unemployment pressures. The study highlights the
transient nature of inflation’s impact on household welfare in Nigeria.
inflation, exchange rate volatility, and unemployment in shaping consumption dynamics. Unit root and diagnostic tests were applied to ensure robustness, while estimations were conducted with Views. The findings reveal that inflation significantly increases household consumption in the short run but exerts no meaningful long-run effect. Exchange rate volatility and unemployment were found to be insignificant in both the short and long run, reflecting the moderating influence of Nigeria’s informal sector. Overall, the results suggest that while households adjust nominal spending upward in response to short-run price shocks, long-run consumption remains resilient to inflationary, exchange rate, and unemployment pressures. The study highlights the
transient nature of inflation’s impact on household welfare in Nigeria.
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