Abstract
Inflation is a major economic challenge in Nigeria, Africa and the World in general as it reduces the
purchasing and investment power thereby lowering welfare. Over the years, there has been some
unresolved issues on whether inflation has the potential to induce personal consumption
expenditure. There is, however a dearth of information and hence the need for further investigation.
Times series data on personal consumption expenditure, exchange rate, inflation rate and lending
interest rate were gathered fr om the Statistical Bulletin of Central Bank and World Development
indicator. Philip perron unit root test and Autoregressive Distributed Lagged Model (ARDL) were
used for the analysis. The outcome of the study revealed that inflation rate and consumption
expenditure were all stationary at levels. Inflation rate with its lagged values significantly impacts
the consumption expenditure in Nigeria in the short run. The ARDL showed an inverse relationship
between inflation rate and personal consumption expendit ure. A percent change in inflation rate
reduces personal consumption expenditure by 6.4%. Based on the findings, the study recommends
an urgent need for effective monitoring of inflation rate by monetary authorities.
Keywords: Key words: Inflation, Personal consumption expenditure, Nigeria