A systematic review of investment indicators and economic growth in Nigeria

Abstract

Most developing countries, including Nigeria, are stuck in a vicious cycle of low investment caused by insufficient domestic savings, resulting in inadequate capital formation and a large savings-investment gap. Given the significance of investment in poverty alleviation and economic growth, the study conducted a disaggregated analysis on the impact of various measures of investment on economic growth in Nigeria from 1981 to 2020. Using the conventional and structural break stationarity tests, as well as the autoregressive distributed lag (ARDL) approach, the epistemological findings confirm a compelling co-integrating relationship among the study variables and show that credit to the private sector, domestic investment, economic liberalization, foreign portfolio investment, and interest rate have a significant positive impact on long-term growth, whereas foreign direct investment, capital expenditure, and inflation rate retarded growth substantially in the long-run. Furthermore, the short-run results revealed that economic liberalization, private-sector credit, and portfolio investment all correlate positively with growth. In contrast, foreign direct investment, infrastructure spending, and inflation rate are profoundly negative. The study therefore advocated for effective fiscal and monetary policy coordination to lower the cost of doing business, incentivize and open up opportunities for domestic and foreign investors, increase infrastructure spending to create jobs, reduce poverty and sustain growth.