Consumers’ spending and economic performance: Nigeria under investigation

Abstract

This study examines the impact of consumer spending on economic performance in Nigeria, with a focus on national household consumption expenditure and inflation rate. The objectives are to determine the relationship between household consumption and economic performance (proxied as GDPGR), and to evaluate the effect of inflation on this relationship. The study adopts an ex-post facto research design using annual time series data from 1986 to 2023, sourced from the Central Bank of Nigeria and the National Bureau of Statistics. The analytical techniques employed include the Augmented Dickey-Fuller (ADF) unit root test, Johansen cointegration test, Ordinary Least Squares (OLS) regression, and Pearson Product Moment Correlation (PPMC). The findings reveal that national household consumption expenditure (NHCE) has a positive and statistically significant effect on economic growth, with a one percent increase in NHCE leading to approximately 13% increase in GDP growth rate. Surprisingly, inflation also exhibited a positive and significant impact on economic growth within the study period. The model showed a strong explanatory power (R² = 0.82) and passed the diagnostic tests, including stability tests and the Durbin-Watson statistic. The PPMC
coefficient of 0.84 further confirmed a strong positive correlation between NHCE and economic growth. The study concludes that boosting consumer spending and maintaining inflation at a manageable level are crucial for sustainable economic growth in Nigeria. It recommends policy interventions such as wage increases, tax reliefs for low-income earners, and effective inflation control mechanisms to enhance household consumption and overall economic performance. These findings provide useful insights for policymakers and development planners.