Abstract
Private consumption expenditure is one of the largest components of aggregate expenditure in Nigeria. It constitutes about 72% of GDP over the period understudy. It is therefore an important aspect of the macro-economy of any nation. In the same vein inflation has been a persistent evil affecting the economy of Nigeria. So they are both required to have a deep understanding of how macro-economy functions. The determinants of these two aggregates can therefore not be divorced from the activities in the financial sector. Hinging on the Keynesian absolute income consumption hypothesis, the paper used 3 SLS to estimate the two macroeconomic equations. The results showed that money supply, market capitalization and exchange rate had positive impact on personal consumption expenditure. However, it is only market capitalization that is not statistically significant. All the financial variables used—money supply, interest rate and exchange rate had positive relationship with the general price level. However it was only exchange rate that was not statistically significant. The paper concluded that shocks in the financial sector explained the variations in personal consumption and inflation. It was therefore recommended that interest rate and exchange rate should not be absolutely left to the dictate of the market forces. Government should intervene occasionally as the case may demand. Conducive environment that will make activities in the capital market should be encouraged.
Highlights
The results showed that money supply, market capitalization and exchange rate had positive impact on personal consumption expenditure
Other features of the Nigerian economy include weak infrastructural base, high unemployment rate which kept on rising over the years except in 2012 when it fell to 17.17% from 23.4% in 2011, phenomenal growth in money supply fuelled by high fiscal deficits, and balance of payment deficits
The regression results of the aggregate consumption represented by Personal Consumption Expenditure (PCE), Equation (3) and that for inflation represented by general price level (GPL), Equation (4) are presented in Table 1 below followed by their discussion
Summary
The Nigerian economy has been characterized by low productivity of factor inputs, reliance on mono-product base, low and falling capacity utilization of the manufacturing sector, high volatility in foreign exchange earnings and its depreciation which raises. Other features of the Nigerian economy include weak infrastructural base, high unemployment rate which kept on rising over the years except in 2012 when it fell to 17.17% from 23.4% in 2011, phenomenal growth in money supply fuelled by high fiscal deficits, and balance of payment deficits. These have been the case in spite of the various reforms in the financial sector since 1986. The increase in the prime lending rate resulted in high costs of borrowing to the real sector thereby further reinforcing the high cost of production and the unit price of goods and services.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
