Why does Paul find it necessary to lie to everyone?

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Paul sees lying as a way to cope with the life of Cordelia Street.  Paul sees his life as comprising of experiences in which "days and nights out of the dreary blanks of the calendar, when his senses were deadened."  This conformist condition of being is something that does not appeal to Paul.  He lucidly understands that lying is a way to endure this form of consciousness, a realization that he fully grasps when he was in New York:  

The mere release from the necessity of petty lying, lying every day and every day, restored his self-respect. He had never lied for pleasure, even at school, but to be noticed and admired, to assert his difference from other Cordelia Street boys; and he felt a good deal more manly, more honest even, now that he had no need for boastful pretensions, now that he could, as his actor friends used to say, "dress the part."

Lying was the way Paul dealt with the reality of Cordelia Street and its perceived banality.  As Paul developed "a shuddering repulsion for the flavorless, colorless mass of every-day existence," lying became his way of coping with it.  For Paul, the need to lie is what enabled him to endure life.  It is for this reason that he considers suicide as the only plausible option for him.  Living a life in New York where he no longer had to lie became a reality that could not be surrendered.  Going back and thus reverting back to lying were no longer viable options for Paul.

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