IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 2 NO. 3 2017

---

Determinants of Aggregate Consumption Expenditure in Nigeria (1981-2015)

Eberechi B. Ikwuagwu, Florence O. Ariwa & Kingsley O. Onyele

---

Abstract

The study investigated the determinants of aggregate consumption expenditure in Nigeria using time series data from 1981 to 2015. Based on the dataset sourced from Central Bank of Nigeria Statistical Bulletin, income (proxied by gross domestic product), interest rate, government revenue and inflation rate were the key determinants of aggregate consumption expenditure considered in this study. Following the behavioural pattern of the variables on the basis of time series property test involving Augmented Dickey-Fuller (ADF), Autoregressive Distributed Lagged model (ARDL) was adopted due to mixed integration of the variables. The result of the Auto Regressive Distributed Lagged (ARDL) model showed that income (proxied by gross domestic product) has a positive and significant effect on aggregate consumption expenditure in both short run and long run. Also, interest rate was significant in influencing aggregate consumption expenditure. The Granger causality test revealed that among the determinants of consumption expenditure considered, inflation rate was a strong predictor of consumption expenditure. The CUSUM and CUSUMSQ tests showed evidence of long run stability of the parameters of the model. It was therefore recommended among other things that policies that improves gross domestic product should be pursued such as encouraging small businesses and foreign investors by creating a friendly investment environment in the Nigerian economy in order to accelerate productivity which in turn spurs consumption of goods and services.

keywords:

Consumption, gross domestic product, interest rate, inflation and tax revenue

---

References:

Akekere, J. & Yousuo, P. (2012). Empirical analysis of change in income on private
consumption expenditure in Nigeria from 1981 to 2010. International Journal of
Academic Research in Business and Social Sciences, Vol. 2, No. 12.

Babalola, O. O., Danladi, J. D., Akomolafe, K. J. & Ajiboye, O. P. (2015). Inflation, interest
rates and economic growth in Nigeria. European Journal of Business and
Management, Vol.7, No.30.

Chukwulozie O.E. (2006). Life insurance as a source of long time savings in Nigeria:
Regulator?s Perspective. Central Bank of Nigeria publication, Vol. 30, No.1, pp. 20-
31.

Cromb, R. & Corugedo, E. (2004). Long-term interest rates, wealth and consumption. Bank
of England Working paper.

Deutsch, J. & Silber, J. (2005). Measuring multidimensional poverty: An empirical
comparison of various Approaches. Review of Income and Wealth, 51 (1):145-174.

Dutta, N. (2016). Determinants of Keynes consumption function. Economics discussion.

Elmendorf, D. W. (1996). The effect of interest-rate changes on household saving and
consumption: A survey. Federal Reserve Board.

Ezeji, C. E. & Ajudua, C. I. (2015). Determinants of aggregate consumption expenditure in
Nigeria. Journal of Economics and Sustainable Development, Vol.6, No.5.

Fabiosa, J. F., & Jensen, H. (2002). Microeconomic Adjustments of Households to
Macroeconomic Shocks: Household Level Welfare Impacts of the Indonesian
Economic Crisis. Presented at the AAEA Meeting, Long Beach, CA.

Fasoranti, M. M. (2012). The determinants of consumption pattern among rural dwellers of
Ondo State (Case study of Akoko North-West Local Government). European
Scientific Journal March edition vol. 8, No.6.

Ibiwoye, A., Ideji, J. & Oke, B. (2010). The determinants of life insurance consumption in
Nigeria: A co-integration approach. International journal of academic research vol.
2. No. 4.

Iyoha, M. A. (2001). Policy simulation with macro econometric models of the Nigerian
economy. Economic and Financial Review 2 (1), 21 – 25.

Kapoor, M. & Ravi, S. (2009). The effect of interest rate on household consumption:
Evidence from a Natural Experiment in India.

Keynes, J.M (1936) in Fasoranti, M. M. (2012). The General Theory of Employment, Interest
and Money. London Press.

Odionye, C. J., Ugwuebe, S. U. & Ibeleme, S. O. (2015). The effect of financial wealth on
private consumption: Evidence from Nigeria. British Journal of Economics,
Management & Trade 6(4): 300-307.

Oduh, M. O., Oduh, M. O. & Patterson, O. C. (2012). The impact of consumer confidence
and expectation on consumption in Nigeria: Evidence from Panel Data. European
Journal of Business and Management. Vol 4, No.9.

Oladapo, B., Danladi, J., Akomolafe, K. & Ajiboye, O. (2015). Inflation, Interest Rates and
Economic Growth in Nigeria. European Journal of Business and Management,
Vol.7, No.30.

Onwumere, J. U. J., Okore, A. O. & Ibe, I. G. (2012). The impact of interest rate
liberalization on savings and investment: Evidence from Nigeria. Research Journal
of Finance and Accounting, Vol 3, No 10.

Udoka, C. & Roland, A. (2012). The effect of interest rate fluctuation on the economic
growth of Nigeria, 1970-2010. International Journal of Business and Social Science
Vol. 3 No. 20.

Udude, C. C. (2015). Impact of interest rate on savings on the Nigeria?s economy (1981-
2013). Journal of Policy and Development Studies Vol. 9, No. 3.

Wilcox, J. A. (1990). Nominal interest rate effects on real consumer expenditure. Business
Economics.

DOWNLOAD PDF

---

Back