COMPLETE SCHOOL PROJECT TOPICS & MATERIALS :
CHAPTERS: Chapter 1-5
|
DOC FORMAT: MS WORD/PDF
|
PRICE: ₦5,000
THE IMPACT OF DECLINING INFLATION ON HOUSEHOLD CONSUMPTION AND POVERTY REDUCTION IN LAGOS STATE.
Abstract
The chapter examines the complex implications of falling inflation in terms of household consumption habits and poverty reduction policies in the Lagos State, which is the most populous and economically vibrant area in Nigeria. According to macro-economic statistics, the inflationary trend in Nigeria has been significantly tamed, which was on a high of 34.19 to 15.10 percent in June and January 2024 respectively. This tendency has been explained by the intensified monetary policy, agricultural productivity, and stabilisation of foreign exchange rate (National Bureau of Statistics [NBS], 2026). The identified slowdown has serious consequences on the recovery of household buying power that had previously been devastated by the previous inflationary waves and is estimated to increase the real consumption spending to N25.7 trillion in the country by 2025 (PwC Nigeria, 2025). In Lagos where over 40 per cent of the population faces multidimensional poverty due to high cost of living in cities, decline in inflation can help more people to access basic goods and services like food and medical care which leads to poverty alleviation. The discussion is based on empirical literature between 2015 and 2026, theoretical models and policies that relate price stability with economic welfare, and policies to maintain these benefits. The major conclusions highlight that low inflation over the long term does not only spur consumer expenditures but also inclusive growth with a wider implication of urban development in sub-Saharan Africa.
CHAPTER ONE
Introduction
1.1 Background of the Study
The problem of inflation which refers to a persistent rise in the overall price level has in the past been quite a challenge to economic stability in developing economies such as Nigeria. It affects the way resources are distributed, how income is distributed and general wellbeing (Obinna, 2020). During recent years, Nigeria has been facing acute inflationary pressures due to the change of the policy, including the removal of the fuel subsidies policy as well as the floating of the naira, which resulted in the levels of the headline inflation surpassing 34 per cent in mid 2024 (NBS, 2026). Nevertheless, a coordinated effort by the Central Bank of Nigeria (CBN), such as interest-rate increases and supply-side measures, had a significant impact, where the inflation rate had reduced to 15.15.00 in December 2025 and to 15.10.00 in January 2026, the most recent figures in more than five years (Reuters, 2026). Food inflation that disproportionately affects low-income households also slowed to a more tolerable 8.89% in January, 2026, and took the burden off staple goods (Trading Economics, 2026).
Nigeria is an example of national trends in Lagos State, the commercial centre with more than 20 million residents and with 2230 percent of national GDP (Lagos State Ministry of Economic Planning and Budget [LASMEPB], 2025). The increased housing, transportation, and utility prices put urban households in Lagos in greater susceptibility to the multiple effects of high inflation on real incomes (Katuka, 2024). A falling inflation on the other hand maintains purchasing power and promotes increased consumption spending which is a major economic growth driver. The inverse relationship is supported by empirical findings of similar contexts, like Ghana, who showed that 1 per cent increase in inflation may decrease personal consumption by 1.68 per cent in the long term (Adjei and Nketiah-Amponsah, 2022). The real household spending is projected to decline in 2024 by N14.29 trillion in Nigeria because of high inflation rates but is projected to rise strongly in 2025 as prices stabilise and may even hit three-year high (PwC Nigeria, 2025).
In addition, the interaction between inflation and poverty is also well-documented. Inflation is also a regressive tax, which increases inequality and hinders the development of human capital (Habib et al., 2025). Multidimensional poverty impacts sectors like education and health in Lagos, and a reduction in inflation will allow households to switch savings into productive investments, creating a model of high consumption and economic self-sufficiency (Misa, 2025). Recent reports note that there is a positive relationship between inflation and poverty rates over a period of 2015-2024 in Nigeria, and food price volatility is one of the main reasons why the quality of life deteriorates (Misa, 2025). With the falling of the inflation, the possibility of reducing poverty arises as a result of increased affordability and employment in consumption-oriented economies like retail and services (Gbenga, 2024). It is this background that makes it possible to examine the dynamics of how these dynamics are reflected in Lagos with a particular focus on how price stability can help in ensuring that sustainable development goals are attained.
1.2 Statement of the Problem
The inflationary surge of 20232024 driven by structural reform and external shocks in Nigeria triggered extreme adjustments in household consumption, and real expenditure dropped over the last quarter by between 42% and 61% (Nairametrics, 2025). This loss of buying power has been particularly sharp in cities like Lagos where the cost of living is even greater and, therefore, food insecurity increases as well as multidimensional poverty of low-income populations grows (Katuka, 2024). The national poverty levels rose to around 56 per cent in 2024, and another 14 million Nigerians were below the poverty line under an influence of inflation (World Bank, 2025).
Although the recent reduction in inflation has been experienced as at the beginning of 2026, there are still some enduring sectoral inflations, including health and education with high rates of 30.35 and 90.35 respectively, which signify asymmetrical recovery which may slow consumption rebounds and poverty reduction in Lagos (NBS, 2026). There are gaps in the scholarly literature on Lagos-specific studies as a majority of them concentrate on national levels and ignore city-related features, including an informal economy and migration-based demographics (Gbenga, 2024). Policymakers might not realise the potential revolution of the declining inflation without specific research and can sustain welfare inequality in the economic base of Nigeria.
1.3 Objectives of the Study
The primary objective is to examine the impact of declining inflation on household consumption and poverty reduction in Lagos State. Specific objectives include:
- To analyze the relationship between inflation rates and household consumption patterns in Lagos.
- To assess how lower inflation contributes to poverty alleviation among urban households.
- To evaluate the role of macroeconomic stability in enhancing economic welfare in developing contexts like Nigeria.
- To recommend policies for sustaining declining inflation to support long-term poverty reduction.
1.4 Research Questions
- How does declining inflation influence household consumption expenditure in Lagos State?
- To what extent does lower inflation contribute to poverty reduction in urban Nigerian households?
- What macroeconomic factors mediate the effects of inflation on consumption and poverty?
- What policy measures can optimize the benefits of declining inflation for Lagos residents?
1.5 Significance of the Study
This paper has a strong theoretical, practical, and policy applicability in the changing economic environment of Nigeria. In theory, it would enhance the discussion on inflation dynamics in new markets since it incorporates recent urban-specific data in Lagos, which is usually missing in national research on this topic (Misa, 2025). The study of the inverse correlation between falling inflation and improved consumption adds to the economic models, including the Keynesian consumption functional ( According to it, stable prices cause a greater influence on disposable income and aggregate demand, Obinna, 2020). Furthermore, it adds to the literature of poverty by highlighting the role that inflation plays in triggering multidimensional deprivation, which is also familiar with World Bank theories that associate price volatility with inequality and backward human development (World Bank, 2025).
In practise, the results can provide practical information to households and businesses in Lagos to show how reduced inflation can streamline budgeting and investment choices during the post-disaster period in 2024 (PwC Nigeria, 2025). The quantification of consumption rebounds also empowers the consumer to look forward to the improvement of welfare, and the business can take advantage of the improved spending to make effect in other sectors of the economy like retail and services (Habib et al., 2025). In terms of poverty reduction, the study underscores the potential for declining inflation to reduce food insecurity, as evidenced by correlations between food price moderation and improved household security (Katuka, 2024), thereby supporting community-level interventions.
From a policy perspective, this research informs monetary and fiscal strategies by the CBN and Lagos State government, advocating for sustained anti-inflationary measures to foster inclusive growth (LASMEPB, 2025). It highlights the need for targeted subsidies and social safety nets during transition periods, potentially influencing national agendas like the Sustainable Development Goals (SDGs) on poverty eradication (SDG 1) and zero hunger (SDG 2) (IMF, 2024). Academically, it serves as a reference for future studies in sub-Saharan Africa, where similar inflationary challenges persist, promoting comparative analyses (Agyepong, 2026). Overall, by substantiating the welfare benefits of price stability, this study advocates for proactive economic management to mitigate poverty and enhance living standards in urban Nigeria.
1.6 Scope of the Study
The scope encompasses Lagos State from 2015 to 2026, with emphasis on post-2023 economic reforms, utilizing secondary data from sources like NBS reports, World Bank analyses, and scholarly publications on inflation trends. It focuses on household-level impacts, excluding broader fiscal implications. Limitations include potential data aggregation biases, as national statistics may not fully capture Lagos’s informal sector dynamics, and external variables like global commodity fluctuations could influence outcomes (Habib et al., 2025). Despite these, the study provides robust insights into recent inflationary declines.
References
Adjei, S. K., & Nketiah-Amponsah, E. (2022). The impact of inflation rate on private consumption expenditure and economic growth—Evidence from Ghana. Open Journal of Business and Management, 10(2), 1066–1083. https://doi.org/10.4236/ojbm.2022.102057
Agyepong, L. (2026). Household consumption expenditure determinants across poverty subgroups in Sub-Sahara Africa: Evidence from the Ghanaian Living Standard Survey. Journal of Family and Economic Issues. https://doi.org/10.1080/10875549.2024.2338164
Gbenga, A. S. (2024). The impact of inflation and household consumption in Nigeria. Journal of Applied Zonal Economics, 1(1), 1–10.
Habib, A. O., Ogunlana, O. F., & Afolabi, A. O. (2025). Income, food inflation, and human capital development in Nigeria: A mixed method approach. Scientific African, 26, e02424. https://doi.org/10.1016/j.sciaf.2024.e02424
International Monetary Fund. (2024). Nigeria: 2024 Article IV Consultation – Press Release; Staff Report. https://www.elibrary.imf.org/view/journals/002/2024/102/article-A001-en.xml
Katuka, S. A. (2024). Impact of inflation on food prices and household food security in Nigeria. MRS Journal of Accounting and Business Management, 2(8), 1–5.
Lagos State Ministry of Economic Planning and Budget. (2025). 2025 Lagos Economic Development Update. https://lagosmepb.org/wp-content/uploads/2025_lagos_economic_development_update.pdf
Misa, M. (2025). Impact of inflation on poverty and living standards in Nigeria: Analyzing the effects from 2015 to 2024. International Journal of Finance, Accounting and Management Studies, 1(1), 1–12.
Nairametrics. (2025). Household spending in Nigeria set for 3-year high as inflation cools. https://nairametrics.com/2025/08/20/household-spending-in-nigeria-set-for-3-year-high-as-inflation-cools/
National Bureau of Statistics. (2026). Consumer Price Index January 2026 Report. https://www.nigerianstat.gov.ng/
Obinna, O. C. (2020). Effect of inflation on household final consumption expenditure in Nigeria. Journal of Economics and Development Studies, 8(1), 104–111.
PwC Nigeria. (2025). Household spending in Nigeria set for 3-year high as inflation cools. Outlook Report.
Reuters. (2026, February 16). Nigeria inflation slows before first central bank meeting of 2026. https://www.reuters.com/world/africa/nigeria-inflation-slows-before-first-central-bank-meeting-2026-2026-02-16/
Trading Economics. (2026). Nigeria Inflation Rate. https://tradingeconomics.com/nigeria/inflation-cpi
World Bank. (2025). Nigeria Development Update. https://www.worldbank.org/en/country/nigeria/publication/nigeria-development-update-ndu