An Error Correction Model of the Impact of Private Sector Credit on Private Domestic Investment in Nigeria

Abstract

The study investigated the impact of private sector credit on private domestic investment in Nigeria using the error correction model technique. The objective of the study was to determine the impact of private sector credit (PSC) on private domestic investment (PDI) in Nigeria using the error correction model that addressed all errors associated with time series data. The study found out that increase in private sector credit (PSC) though not statistically significant leads to increase in private domestic investment (PDI) as typified by 10% increase in private sector credit which led to 6% increase in total domestic investment in Nigeria. However, the non statistical significance of private sector credit showed that there is need for increase in private sector credit in the Nigerian economy.

Keywords: Private Sector Credit, Private Domestic Investment, Error Correction Model.