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Analysing Household Budget Adjustments in Response to Rising Prices in Nigeria

AmafadeGoodluck Phinna, Ehiedu, Victor C

Abstract

This study analyzed household budget adjustments in response to rising prices in Nigeria via ex-post facto research design. Secondary data on household budget adjustments (total household income, and household final consumption - also known as private consumption expenditure) and rising prices (measured by consumer price index) were obtained from the Central Bank of Nigeria and National Bureau of Statistics bulletins during the period 1991 - 2024. Using an unrestricted vector auto-regression model, the study revealed that household budgets adjusted in response to rising prices significantly. This finding is partly explained by the fact that when there is hike in prices or inflation, it would make households to adjust or re-adjust their budgets in tandem with current inflation rates. The study concludes that during the periods under investigation, household budget adjusts significantly due to exogenous variation in rising prices of past values. On the basis of the findings, the study recommends that the government should put effective and efficient control measures in place that can help control and stabilize inflation. The study contributes to knowledge by establishing that household budget adjustments significantly and negatively respond to rising prices. Finally, the study fills the gap in economics and finance literature on the linkage between household budget adjustments and rising prices in Nigeria by extending data till 2024.

Keywords

Households budget; Rising prices; Inflation; Budget adjustments; Fixed income

References

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