The Effect of Economic Policies on Private Consumption Expenditure in Nigeria

Abstract

This study empirically examined the effect of economic policies on private consumption expenditure in Nigeria from 1981 to 2014 using time series data. The study employed the fiscal and monetary policy variables (government expenditure and broad money supply) in order to establish this relationship and adopted the Ordinary Least Square (OLS) method of estimation. The unit root and co-integration test were conducted on all the variables and the result revealed the existence of
stationarity and long run relationship among them. The empirical result of the model showed broad money supply as having a positive and insignificant relationship with private consumption expenditure in Nigeria. The result further indicated a positive and significant relationship between government expenditure and private consumption expenditure in Nigeria. In the analysis of the relationship between private consumption expenditure and Gross Domestic Product in Nigeria, the result of the model showed that Gross Domestic Product has not significantly impacted on
private consumption expenditure for the period under review. Therefore, it was recommended from this study that the Nigerian government should refocus and redirect monetary and fiscal policy towards production of goods and services so as to enhance private consumption expenditure, economic growth and development.