Exploring the Dynamics of Economic Instability: An Analysis of the Interplay between Consumer Spending, Consumer Confidence, and Macroeconomic Factors

Abstract

This study empirically evaluates the effect of consumer confidence on consumer spending in Nigeria. Relatively little attention has been paid to the existence of a long-run relationship between consumer confidence and consumer spending in Nigeria, and this study aims to contribute to the existing literature in this regard by utilising quarterly data spanning from 2009 to 2023. Examining the relationship through the autoregressive distributed lag (ARDL) model, it was found that consumer confidence, money supply, and inflation have a significantly positive impact on consumer spending, while interest rates possess an adverse relationship with consumer spending in Nigeria in the long run. The findings of the study recommend that good infrastructure, ease of doing business, and reduction of tax rate on everyday purchasing are key contributors to consumers’ optimism. Additionally, efficient responses to economic shocks and effective policy reformation according to the shift of the dynamic financial world are also crucial to making the economy well-run and maintaining the level of consumers’ confidence.