Effect of Domestic Investment on Economic Growth in Nigeria (1990-2017)

Abstract

Business investment has been titled as a critical accelerator of economic growth and development by economists. Due to this, government all over the globe have made frantic efforts towards shooting` up the level of business investment in their respective countries with the intention of bringing about increased levels of output. It is for this singular purpose that this study sought to examine the effect of domestic investment on economic growth in Nigeria. The study utilized annual series data obtained from the World Development Indicator of the World Bank, the statistical bulletin of the Central Bank of Nigeria and other secondary sources. The Ordinary Least Squares method and the Error Correction Model technique was employed in analyzing the annual series data that covered the 28 years of the study spanning from 1990 to 2017. The result of the Johansen co-integration test conducted revealed that gross domestic product growth rate, domestic investment in the manufacturing sector, domestic investment in the service sector and domestic investment in the agricultural sector move together in the long run. The outcome of the long run estimation indicated that neither domestic investment in the manufacturing sector, domestic investment in the service sector or domestic investment in the agricultural sector impacted significantly on economic growth (indexed by GDP growth rate). The short run results also divulged the lack of significant impact of the regressors on economic growth in Nigeria. On the backdrop of this, the study advanced that the government improves on the ease of doing business in Nigeria so as to increase the volume of investment and make it growth-oriented and also provide a lasting solution to the prevailing farmers’/herdsmen clashes so as to encourage substantial investment in the secto

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