An Empirical Examination of the Determinants of Private Investment in Nigeria.

Abstract

The study investigates the determinants of private investment in Nigeria, employing the Autoregressive Distributed Lag framework on data from 1980 to 2016. In all, the study provides evidence that real gross domestic product, public investment, real interest rate, real exchange rate, credit to private sector and external debt both in a short run and long run significantly affect the level of private investment, except for inflation which was insignificant. Our study revealed that real gross domestic product play an increasingly important role in supporting the nation’s growth in private investment. The study recommends that government should give more priorities to expenditures that compliment (crowd in) private investment: such as capital expenditure. Also since previous exchange rate policies are most likely to spur and speedup the growth and development of the domestic industries and also it has the likelihood to increase investment in this sector. Therefore, necessary adjustments need to be effected for the proper positioning of present exchange rate policies to encourage the investors and investment in the domestic economy.

Keywords: Private investment, Real Gross Domestic Product, Real Interest Rate, Real Exchange Rate, Credit to Private Sector

DOI: 10.7176/JESD/10-2-11