Abstract
This study aimed to investigate economic growth (RGDP) and its determinants such as internal debt (INDT), external debt (EXDT), interest rate (RINR), exchange rate (REXR) and trade openness (OPEN). Quarterly data from 1986-2021 used for this investigation were extracted from Central Bank of Nigeria. Exploratory data analysis (EDA) revealed linear dependence of RGDP and the aforementioned determinants. The EDA and the variance inflation factor revealed the presence of multicollinearity caused by the INDT. As a result of this, the ridge regression method was used and it was found that the multicollinearity problem was addressed with appropriate ridge constant K= 0.29. Hence, ridge regression technique with constant K= 0.29 was a robust method to predict economic growth in Nigeria using the explanatory variables under consideration. Thus, served as a great benefit to the policy makers as the study provided a better understanding of the economic growth and the aforementioned determinants in terms of relationship and in particular the set back caused by EXDT on the economy of Nigeria. Also, the researchers benefited from this study as it engendered the understanding of the appropriate estimation technique to be used when the presence of multicollinearity was established in fitting a linear model.
Highlights
Nigerian economy poses several challenges to scholars and various researchers as a result of its structural, distinctiveness and outcomes and the fundamental contradictions therein
We aim to find an estimate of the parameters of linear model that show the relationship of RGDP with internal debt (INDT), external debt (EXDT), RINR, REXR and OPEN under the violation of independency of explanatory variables using ridge regression technique in other to enhance the efficiency of the estimate which was majorly lacking in various work reviewed in this study
An examination of an efficient estimator for the parameters of an economic growth (RGDP) and it determinants such as INDT, EXDT, RINR, REXR and OPEN in the presence of multicollinearity problem was thoroughly investigated using an ordinary least square and ridge regression techniques
Summary
Nigerian economy poses several challenges to scholars and various researchers as a result of its structural, distinctiveness and outcomes and the fundamental contradictions therein. In the late 1960s, crude oil became the main driver of growth after a move from agricultural based economy. Despite the high-level of revenues generated from oil since its main stay and the economy driver, it has failed to transform into expected prosperity and development of the nation and its citizens. The economic growth is epileptic, face serious unsustainable and inconsistent growth subject to the instability and crashes witnessed in the revenue generated from crude oil in the world market in spite of several plans, policy frameworks and reforms. Programme, vision and reforms on macroeconomic variables such trade openness, interest and exchange rate, external and domestic debt management proposed at the different time and level stimulates much expectations but in actual fact bring into being minute impact due to negligence and dishonesty and as such the continuous pitiable show that put the growth of the economy under serious problem and threat. Avoidable disease and misery are the traceable attributes and characteristics to describe Nigerian citizens because those in the helm of affair of the nation has failed to demonstrate stern dedication, control and sacrifice in steering growth and advancement
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