Impact of Inflation on Household Consumption Expenditure in Nigeria (1990-2024)

This study examined the impact of inflation on household consumption expenditure in Nigeria over the period 1990 to 2024. Specifically, the study determined the effect of the Consumer Price Index on household consumption expenditure and established the causal relationship between the two variables. An explanatory research design was adopted, using annual time-series data obtained from the Central Bank of Nigeria, the National Bureau of Statistics, and the World Bank. Household consumption expenditure was specified as the dependent variable, while inflation rate, real gross domestic product per capita, interest rate, and exchange rate were specified as the explanatory variables. The Ordinary Least Squares estimation technique was employed, supported by the Augmented Dickey-Fuller unit root test, a correlation matrix, and the Variance Inflation Factor to guard against spurious regression and multicollinearity. The results show that exchange rate and real GDP per capita exert positive and statistically significant effects on household consumption expenditure, while interest rate exerts a negative and statistically significant effect. Inflation exerts a positive but statistically insignificant effect on nominal household consumption expenditure. The model returned an R-squared of approximately 0.748, indicating that the explanatory variables jointly account for about 74.8 percent of the variation in household consumption expenditure. The study concludes that exchange-rate stability, household income growth, and moderate interest-rate conditions are important determinants of household consumption expenditure in Nigeria, and that although inflation was not a statistically significant driver of nominal expenditure, it remains economically capable of eroding real purchasing power. The study recommends the pursuit of exchange-rate stability, the improvement of household income and economic opportunities, the maintenance of moderate interest rates, the strengthening of measures against inflation, and the protection of vulnerable households.