Title Page                                                                               ..          ..          ..          i

Certification Page                                                                ..          ..          ..          ii

Approval Page                                                                      ..          ..          ..          iii

Dedication                                                                             ..          ..          ..          iv

Acknowledgement                                                               ..          ..          ..          v

Table of Contents                                                                 ..          ..          ..          vi

List of Tables                                                                        ..          ..          ..          viii

Abstract                                                                                 ..          ..          ..          ix



1.1    Background of the Study                                           ..          ..          ..          1

1.2    Statement of the Problem                                           ..          ..          ..          4

1.3    Research Questions                                                    ..          ..          ..          5

1.4    Objectives of the Study                                              ..          ..          ..          6

1.5    Research Hypotheses                                                 ..          ..          ..          6

1.6    Significance of the Study                               ..          ..          ..          ..          6

1.7    Scope of the Study                                                      ..          ..          ..          7



2.1    Conceptual Literature                                                            ..          …         ..          8

2.2    Theories on Consumption Expenditure                   ..          ..          ..          22

2.3    Empirical Literature                                                   ..          ..          ..          15

2.5    Summary and Limitations of the Previous Studies                        ..          ..          20



3.1    Theoretical Framework                                  ..          ..          ..          ..          22

3.2    The Model                                            ..          ..          ..          ..          ..          24

3.3    Model Specification                                       ..          ..          ..          ..          24

3.4    Estimation Procedure                                                 ..          ..          ..          25

3.4.1   Unit Root Test                                                          ..          ..          ..          ..          26

3.4.2    Co-integration Test              ..          ..          ..          ..          ..          ..          26

3.4.3     Error Correction Model                  ..          ..          ..          ..          ..          27

3.5       Speed of Adjustment                       ..          ..          ..          ..          ..          ..          27

3.6    Justification of the Model     ..          ..          ..          ..          ..          ..          28

3.7    Method of Result Evaluation                        ..          ..          ..          ..          ..

3.8    Sources of Data                       ..          ..          ..          ..          ..          ..          ..          29



4.1    Analysis of the Data Generating Process    ..          ..          ..          ..          30

4.1.1   Descriptive Analysis of the Data   ..          ..          ..          ..          ..

4.1.2               Unit Root and Co-integration Analysis    ..          ..          ..          ..

4.1.3               Johansen Co-integration Test        ..          ..          ..          ..          ..

4.2    The Estimation Results                      ..          ..          ..          ..          ..          ..          31

4.2.1               Result of Long-run PFP Model      ..          ..          ..          ..          ..

4.2.2               Result of Long-run HHCX Model ..          ..          ..          ..          ..

4.3    Trend Analysis                        ..          ..          ..          ..          ..          ..          ..          31

4.4    Evaluation of Hypothesis      ..          ..          ..          ..          ..          ..          32



5.1    Summary of Research Findings        ..          ..          ..          ..          ..          38

5.2    Policy Options and Recommendations        ..          ..          ..          ..

5.3    Conclusion ..    ..          ..          ..          ..          ..          ..          ..          ..

5.2    Suggestions for Further Studies                                ..          ..          ..          39






TABLE 1: People Affected By Droughts and Floods in Africa ..         ..

TABLE 2: Federal Budget Actual Expenditure on Agriculture (Billion)      ..

TABLE 3: Definitions and Source(s) of Data      ..          ..          ..          ..

TABLE 4: Descriptive Statistic      ..          ..          ..          ..          ..          ..

TABLE 5: Correlation Matrix        ..          ..          ..          ..          ..          ..

TABLE 6: Unit Root Analysis          ..        ..        ..        ..        ..        ..

TABLE 7: Johansen Co-integration Analysis      ..          ..          ..          ..

Table 8: Results of Maximum Eigenvalues      ..          ..          ..          ..          ..

TABLE 9: Long-run Estimation of PFP Model         ..          ..          ..          ..

TABLE 10: Long-run Estimation of HHCX Model  ..          ..          ..          ..




1:1 Background of the Study

Climate which is the atmospheric condition of a particular location over a long period of time may under its harsh and abnormal events poses serious threat to the socio-economy of the developing nations especially on households’ consumption expenditure pattern. On the other hand, this atmospheric condition of a particular location over a short period of time constitute weather which it’s characteristics over West Africa are usually driven by the pressure and wind systems whose dynamics depend on the surface pressure system over North Africa and over the South Atlantic Ocean.


Nigeria climate is largely dictated by the seasonal northward and southward oscillatory movement of the inter-tropical discontinuity (ITD). The moist southwesterly winds from the South Atlantic Ocean, which is the source of moisture needed for rainfall and thunderstorms to occur, prevail over the country during the rainy season (April-October). In reverse, northeasterly winds which raise and transport dust particles from the Sahara Desert prevail all over the country during the harmattan period (November-March). The overall changes in temperature, rainfall and other meteorological parameters determine the changes in climate in the country each year (Nigerian Meteorological Agency, NIMET, 2010). Other climate variables that may change includes rain, sand and thunder storms, floods, droughts, heat-waves, sea-level rise, ocean acidification, glacial melting, desertification and global warming. The changes in the above mentioned climate variables may have both direct and indirect impact on consumption expenditure. However, the present study will not consider all the climate variables enumerated above but will focus more on changes in annual rainfall, CO2 emission, drought, flood and extreme temperature in relation to the changes in the quantity of food produced, prices of food consumed and the gross domestic products within the period under study.


Temperature by definition is the degree of hotness or coldness of a place, body or object. Nigeria is a tropical country characterized by high temperature, though the temperature is higher in the northern part than the southern part. Its effects on human activities especially on agricultural activities cannot be over emphasized. This is because different crops tolerate different temperature levels. Crops like Guinea corn, millet and sisal can tolerate high temperature and low rainfall while maize, rice, yam, cocoa and palm tree can tolerate both high temperature and rainfall. Excessive temperature reduces animal production and causes death in some cases. According to Ezedimma and Onazi (1986), it is possible to grow various crops throughout the year if adequate water is provided in combination with the normal temperature.


Rainfall as another agent of climate manifest itself in three major ways, namely, conventional, orographic and cyclonic, which may improve or hinder human activities more especially the agricultural activities. The amount of rainfall and it’s distribution throughout the year determines the choice of crops, farming system to be practiced and the timing of operation. In northern part of Nigeria where rainfall is insufficient in terms of the quantity and duration, only crops that can survive within a short period such as cereals and forage crops are grown. Heavy rainfall on the other hand accounts for most of the tree crops and thick forest which sometimes harbour insects and diseases of farm animals. Also conventional rainfall mentioned earlier may not be entirely useful for agriculture because the rain would be so intense that it does not sink into the soil but drained off almost immediately.


Flooding which is due to a combination of above normal rainfall during the year and the collapse of some dams with other climate variables leave the major share of their catastrophic consequences of climate change to human activities especially the agricultural activities. This affects households’ consumption and could contribute significantly or not to the gross domestic product (GDP) of many developing economics which Nigeria is one of them.


In his view, Anyadike (2009) described climate change as the shift in the mean state of the climate on its variability persisting for an extended period which could be decades or longer. Ayoade (2004) on the other hand defined it as a long-term shift, alteration or change in the type of climate prevailing over a specific location, region or entire planet. The question remains: if such change occurs, will its economic effects be positive or negative on the consumption and expenditure pattern of people? Deschenes and Greenstone (2007) supported the positive effect of climate change when they argued that the changes in temperature and precipitation will actually benefit agricultural activities and consequently affects positively the consumption and expenditure pattern of people in developed countries like America. However, the negative effect of climate change especially to the socio-economic life of the developing world has been listed as desert encroachment, coastal inundation, drying up of surface water etc which contribute to low agricultural productivities that may consequently affects negatively the consumption and expenditure pattern of people (Odjugo, 2010).


Nigeria has not been relenting in attempting to mitigate the rising negative effects of climate change. Currently, she is one of the member countries of the World Weather Watch, established in 1967 in Geneva during a World Meteorological Congress. Not left out is the International Fund for Agricultural Development (IFAD) equally, Federal Government of Nigeria has established the Environmental Protection Agency by decree 58 of 30th Dec. 1988, all geared towards fighting and mitigating the negative effects of climate change.


Irrespective of the above efforts by the Federal Government of Nigeria, more reports and findings on negative effect of climate change are still emerging. For instance, United Nation Convention on Trade and Development (UNCTD) (2009) had reported that in the year 2007, flood activities resulted in the destruction of about 13 villages in Sokoto State, while in neighboring Zamfara State over 100 houses were destroyed; about 20 deaths were recorded in Kanke area of Plateau State while about 3,000 farms were waterlogged in Kastina State (United Nation Conference on Trade and Development, 2009). This report is nothing to write home about compared to UN office for the coordination of Humanitarian Affairs’ (OCHA) report on 2012 flood which affected around seven million people together with property worth millions of Naira.


As Nigeria agricultural practices depend highly on natural climate pattern, such unfavorable variation in climate may lead to serious decline in food production, consumption, employment opportunities, and raw materials to agricultural based industries which could negatively affect economic growth in the country. Therefore, the volatility of agricultural output due to climate change shocks may not only mean a large burden for low-income household, given the limited government social security arrangements and incomplete credit/insurance markets but may cause increase in prices of food and reduction in public consumption. These may affect the disposable income which is the determinant of consumption. This study intends to investigate the impact of climate change on the households’ consumption and expenditure pattern of Nigerians.


1.2 Statement of the Problem


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