Determining Private Investment Reaction from Government Deficits: Evidence from Nigeria

Abstract

This study examined the effect of government deficit on private investments in Nigeria for the long- run period of 1981 to 2022. The control variables, which are GDP growth rate, total government revenues, total government expenditures, inflation and private sector credits in Nigeria are coded GDPG, GVR, GVX, INF and CPS. The result of the study showed that, as government deficit impede private investments, its effect was statistically significant, together with a significant negative effect from private sector credits and government revenues. This means that government deficit crowd out private investments in Nigeria from 1981 to 2022, all things being equal. In line with the findings/conclusion made in this study, the following recommendation is put forward: As government deficit coefficient took up a negative sign, it means it impeded private investment in Nigeria. To address the deleterious impact of domestic debt on private investment, government, together with its borrowing from the domestic credit market should get the monetary policy of the Central Bank of Nigeria to address the inflation and exchange rates uncertainties so that the market scope of the private investors will be enlarged.

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