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Challenges of Population Dynamics in Nigeria: Implications for Household’s Portfolio Choices

Kanayo Ogujiuba

Microeconomics from EconWPA

Abstract: This research study attempts to quantify and examine how changes in Population dynamics affect household portfolio choices (expenditure on food, monetary transactions, goods and services and non-cash expenditure) in Nigeria given the fact that Nigeria is going through a demographic transition. Previous efforts to assess impacts of Population growth have ignored the household expenditure responses, which has been far from being definitive on the transmission net effects on household portfolio choices. This study focuses on Nigeria with the aim of overcoming these defects and obtaining reliable information. The study establishes a link between demographic variables and household expenditure components using the Vector Error Correction Methodology. Next, the estimated equations are used to project the pattern of the different components of expenditure income based on three population scenarios generated from different assumptions on changes in fertility. Nonetheless, several counterfactual simulations were examined to enhance our understanding of the effects of Population dynamics on contingent choices. The results suggest that population dynamics in Nigeria can produce significant effects on the economy via the expenditure profiles of households. The results also suggest that other factors such as real per capita income, ratio of other expenditure categories to total expenditure influence growth of household expenditure components. The results of the study have some important implications for policy: • Pursuit of prudent macroeconomic policy has significant payoffs, as it avoids further constraints on household’s provision of essential social services, such as health services; • The rate of urbanization in Nigeria affects many categories of household expenditure, and therefore government policy of directing policies that would improve household expenditure on monetary transactions is likely to have significant payoffs in terms of easing the rate of pressure on households. • The results show how changes in age structure could be extremely relevant to the process of economic growth. Finally, there must be a sustainable momentum to boost monetary transactions among the people as a means of revitalizing the weakened social pillar. Doing so calls for a population rights approach to development planning that places people at the centre of developmental efforts. This will help in achieving the objectives envisaged for the social charter in the “NEEDS” framework. The determination for an appropriate mix of policies for managing Nigeria’s development requires prescriptions that recognize the structural linkages between the sectors. Such prescriptions must uniquely isolate, define and determine the nature and magnitude of the change variables that drive the development process. The necessity of such prescriptions should form the building blocks of national development planning and resource management. This entails reconciling planning with implementation and carrying out regular analysis of the challenges of population dynamics that underpins the NEEDS programme.

JEL-codes: D1 D2 D3 D4 (search for similar items in EconPapers)
Date: 2005-12-30
Note: Type of Document - pdf; pages: 29
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