Impact of Domestic Investment on Economic Growth in Nigeria

Abstract

This study investigated the impact of domestic investment on economic growth in Nigeria from the period 1990 to 2022. The dimensions that were used to proxy the independent variable are domestic investment, total exports, interest rate and inflation while real gross domestic product was used to proxy economic growth which is the dependent variable. Data used were sourced from secondary sources which includes; World Bank development indicators for various years and the Central Bank of Nigeria annual statistical bulletin. The Statistical Software employed to analyse the data was the eviews9. The results of the Unit root test show that domestic investment, total exports, interest rate and real gross domestic variables evaluated are all stationary after first difference- I(1)- while inflation rate was stationary at level- I(0)-. The Autoregressive distributed lag was used to analyze data. The results of the Autoregressive distributed lag estimates reveal that in both the long run and short run, domestic investment, total exports, coefficients have positive impact on real gross domestic product in Nigeria and both are also statistically significant at five percent level of significance in the long-run in Nigeria. Since it was found that increase domestic investment and total exports bring about economic growth, the study therefore, recommends amongst others that appropriate trade policies in favour of export expansion should be encouraged. The federal government of Nigeria should make concerted effort towards export promotion policy by encouraging domestic investors to go into more production. In order to achieve this, there is need for the government to reduce interest rate and tax rate.