The Determinants of Aggregate Consumption Expenditure: Empirical Evidence from Nigeria

This study investigated the determinants of aggregate consumption expenditure in Nigeria. The model employed was derived from the Keynesian consumption function where consumption is explained by variations in income; C= f(Y). The study covered the period of 1981–2015. The study estimated an error correction model (ECM) using ordinary least squares estimation technique. The study showed that income (proxy by gross domestic product) has a positive significant impact on aggregate consumption expenditure in Nigeria. It was recommended that employers of labour should endeavor to increase the workers’ salaries periodically in line with the changes in the country's macroeconomic and microeconomic variables. It is only when salaries are increased in line with the prevailing economic situations in the country that consumers can improve on their consumption expenditure through increase in their disposable income. Policies which reduce tax should also be formulated to enhance consumers’ disposable income. The Nigerian government should make amiable efforts to provide infrastructures, security and enabling environment for business to strive as good performance of business in the country will improve the returns on investment and finally impact positively on aggregate consumption expenditure.