Effect of Inflation on Consumer Purchasing Behaviour in Nigeria: 1990–2025

This study examined the effect of inflation on consumer purchasing behaviour in Nigeria over the period 1990 to 2025, proxying purchasing behaviour with Real household consumption expenditure (RHCE). The study was motivated by the persistent erosion of household purchasing power occasioned by successive inflationary episodes, including the Structural Adjustment Programme-induced price shocks of the 1990s, the post-2016 recession inflation, and the sharp price surge that followed the 2023 removal of the petroleum subsidy and unification of the exchange rate, alongside conflicting empirical evidence on how inflation and the general price level jointly shape household spending patterns. Specifically, the study sought to examine the effect of the inflation rate on consumer purchasing behaviour, determine the effect of the consumer price index (CPI) on consumer purchasing behaviour, and ascertain the relationship between the inflation rate and the CPI in Nigeria. Annual time series data spanning 1990–2025 were sourced from the Central Bank of Nigeria Statistical Bulletin, the National Bureau of Statistics, and the World Bank World Development Indicators. The Augmented Dickey-Fuller test showed that the variables were integrated of mixed order, I(0) and I(1), justifying the use of the Autoregressive Distributed Lag (ARDL) Bounds testing approach to cointegration, which confirmed a long-run relationship among the variables. The long-run ARDL estimates showed that the inflation rate exerted a negative and significant effect on household consumption expenditure, the CPI exerted a positive and significant effect, and a Pearson correlation analysis revealed a strong, statistically significant positive relationship between the inflation rate and the CPI. The error correction term was negative, less than unity, and significant, indicating that about 58.9% of short-run disequilibrium is corrected annually. The explanatory variables jointly accounted for approximately 92.1% of the variation in household consumption expenditure. The study concludes that rising inflation has progressively weakened real household purchasing power in Nigeria and recommends inflation-targeting monetary policy, income-support measures, and price stabilization for staple consumer goods.

Inflation Rate, Consumer Price Index, Household Consumption Expenditure, Purchasing Behaviour, Autoregressive Distributed Lag.

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