Monetary Policy And Household Consumption Expenditure In Nigeria

Abstract

The study investigated the complex link that exists in Nigeria between household consumption expenditure and monetary policy from 1981 to 2019. The study used various statistical techniques and information from the Central Bank of Nigeria's yearly releases. Several statistical tests were used in the investigation, including co-integration tests, ordinary least squares, error correction models, and unit root tests to determine stationarity. The empirical results provided some fascinating new information. The broad money supply followed a normal distribution pattern throughout the time, with a very low probability value of 0.000073%. The statistically normal distribution trend was also observed in exchange rates, with a probability value of 0.044926%. Similarly, the focal dependent variable, household consumption spending, showed a significant normal distribution, as evidenced by the 0.041% probability value. Interest rates supported their place in the regression analysis by following a normal distribution at the 0.041% level of significance. Especially noteworthy was the study's finding that the nation's household consumption expenditure increased in tandem with the amount of broad money supply over time. On the other hand, household consumption expenditure and exchange rates showed a negative association, indicating that households may boost their spending by carefully managing the exchange rate. Furthermore, it was discovered that interest rates affect household consumption expenditure, with a 4.24% decline in consumer expenditure over time resulting from an increase in interest rates. Based on these findings, the monetary authorities in Nigeria should consider raising the broad money supply to boost economic activity. In addition, the government should establish a stable exchange rate through the Central Bank of Nigeria to stimulate increased household consumption. Finally, the study emphasizes how crucial it is to monitor and stabilize interest rates to sustain household savings and consumption.