Monetary policy impact on aggregate consumption expenditure in Nigeria

Abstract

The effect of monetary policy on aggregate consumption expenditure in Nigeria was investigated in this report. The research looked at time series data from the Central Bank of Nigeria between 1980 and 2018 using the normal error correction mechanism (ECM). The relative effectiveness of monetary policy instruments in changing aggregate consumption expenditure in Nigeria was
investigated using the St. Louis modeling method. Money supply, interest rate, exchange rate, and disposable income are all thought to be monetary policy instruments that affect Nigeria's total consumption expenditure. The cointegration test results for all requirements indicated the presence of long run relationships among the estimated variables. An increase gross demand is
fueled by an increase in money supply. Nigeria's aggregate consumption was slashed as exchange and interest rates rose. The exchange rate and interest rates, on the other hand, have proven to be more powerful monetary instruments than the money supply in influencing aggregate demand. We suggest that monetary experts devise an effective exchange rate strategy that encourages rather than discourages consumption.