Income and Household Consumption Expenditure in Nigeria: An ECM Approach

Wosu,  Chidi; Suotor,  Memoye

doi:10.51699/cajssh.v6i1.1378

Authors

Wosu, Chidi Department of Economics, Faculty of Social Sciences, Ignatius Ajuru University, Rivers State, Port Harcourt
Suotor, Memoye Department of Economics, Faculty of Social Sciences, Ignatius Ajuru University, Rivers State, Port Harcourt

DOI:

https://doi.org/10.51699/cajssh.v6i1.1378

Keywords:

income, household, expenditure, inflation rate and interest rate

Abstract

This study examined the relationship between income and household consumption expenditure in Nigeria from 1980 to 2025. Key independent variables are aggregate savings, interest rate, inflation rate, national income and population size while household consumption expenditure is the dependent variable. Data were sourced from the Central Bank of Nigeria (CBN) Statistical bulletin and the analysis employed the Augmented Dickey Fuller (ADF) Unit root test to co-integration and the Error Correction Mechanism model to ensure data stationarity of short-run connections. The ECM result of -0.700588 or 70 % indicate the speed of adjustment from the long run to its short dynamics. Results also discovered that R² is 0.670144 (67 %) meaning that the various independent variables explain 67 % of the variations in the dependent variable. The study concludes that improving household expenditure and standard of living in Nigeria will depend on strengthening the country's household income is vital and essential goods should be made available to the teeming population and finally, policies aiming on job creation, inflation reduction, and exchange rate stability would help to increase household consumption expenditure in Nigeria.

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