Monetary Policy, Inflation and Household Welfare in Nigeria

In order to manage the welfare of Nigerian households, the Monetary Policy Committee works diligently to counteract the nation's growing inflationary pressures. Therefore, using time series data from 1990 to 2023, this study investigates how inflation and monetary policy affect household wellbeing in Nigeria. Actions are necessary to improve Nigerian households' quality of life. The monetary policy rate (real interest rate: bank lending minus inflation), broad money supply (BRM), inflation (INFL), poverty headcount ratio (POV), and GDP per capita (GDPPC) are explanatory variables, and private consumption expenditure (PCE) is used as a stand-in for household welfare in this study. The Auto-Regressive Distributed Lag (ARDL) is used for estimation, and the theoretical framework is based on the demand-pull theory of inflation and the monetary policy transmission mechanism. According to the empirical findings, inflation and monetary policy have a big impact on household wellbeing in Nigeria. Improvements in private consumption expenditure are linked to broad money supply and GDP per capita, but inflation and higher monetary policy rates tend to decrease household welfare. The welfare of households is adversely affected by the poverty headcount ratio. To improve household welfare, the study suggests that fiscal and monetary authorities implement coordinated policies that stabilize inflation and encourage inclusive economic growth. Furthermore, to improve the well-being of Nigerian households, proactive steps to reduce poverty and careful management of the money supply are
crucial. Keywords: Private consumption expenditure, monetary policy rate, inflation, broad money
supply, poverty, household welfare, ARDL