Inflation and Household Income in Nigeria: An Empirical Examination

The study investigates inflation and household income in Nigeria using secondary data sources from the publication of the Central Bank Statistical Bulletin and world development indicators from 1981 to 2022. The major objective of this study is to analyze the effects of inflation and household consumption expenditure on household income in Nigeria. To achieve the objectives, the study employed the auto-regressive distributive lag model (ARDL). The results of our findings reveal that inflation has a positive and significant effect on household income in the short-run and long-run in Nigeria. Also, household consumption expenditure indicates a negative/insignificant effect in the short run and a positive/significant effect in the long run. The finding also reveals that there is a unidirectional relationship between inflation and household income in Nigeria, and there is no causal effect between household consumption expenditure and household income. The study therefore recommended that social safety net programs should be strengthened to provide support to vulnerable households during periods of high inflation. This may include cash transfer programs, food subsidies, and access to affordable healthcare. Also, there is a need for improved data collection and analysis on household income and inflation. This will enable policymakers to make more informed decisions and develop targeted policies to mitigate the effect of inflation on income of an individual.

Keywords: inflation, household income, household consumption expenditure, ARDL model, Nigeria.