Do Energy Consumption, Interest Rate and Import affect Household Consumption in Nigeria: What did the Empirical Evidence says?

Abstract

The aim of the paper is to find out the effects of changes in energy consumption, interest rate and import on household consumption in Nigeria. Nigeria has diverse population of over 200 million people. About 70% of the Nigerian population is classified as poor; hence, spend most of their income on consumption of necessities of life. The paper uses log linear regression model and generalized method of moments (GMM) for its analysis. Data was collected for the period ranging from 1985 to 2018. The result of the study shows that interest rate and energy consumption affect household consumption, while import is not statistically significant. This result has important implication for the Nigerian economy. A statistically significant relationship between interest rate and household consumption means that monetary authorities can boost household consumption by lowering the interest rate. The positive and statistically significant relationship between energy consumption and household consumption is expected a priori. It is expected that higher level of household consumption will lead to higher level of energy consumption. The major recommendations of the paper are two: reduction in interest rate and constant supply of energy to boost household consumption which in turn boosts demand for goods and services.