Domestic Investment In Nigeria Research Articles

Heterogeneous Influence of Capital Flight and Economic Policy Uncertainty on Domestic Investment in Nigeria: New Evidence from Quantile Nonlinear ARDL

This study explores the heterogeneous influence of capital flight and economic policy uncertainty (EPU) on domestic investment in Nigeria. The study utilizes the novel quantile-based nonlinear autoregressive distributed lag (QNARDL) estimation procedure to estimate both the sign-based and the size-based asymmetric influence of capital flight and EPU on domestic investment. The investigation’s outcomes are as follows: First, capital flight influences domestic investment negatively, predominantly in the upper quantiles. Second, it demonstrates that country-specific EPU and its global-based variant significantly negatively affect a country’s investment. Third, the study finds that domestic and world policy uncertainty aggravates the suppressing effect of capital flight on domestic investment. Fourth, a robust unidirectional causality from EPU (indigenous and world) to capital flight implies that policy uncertainty enervates the business climate and creates fear of losses among investors, affecting investment negatively. Fifth, the study indicates an increasing rate of devastating influence of EPU on domestic investment, with more pernicious effects at the upper quantile. The implication is that the devastating effect of EPU (whether country-based or world-based) on domestic investment is highly sensitive to its size. The policy recommendations from the main discoveries have been suggested.

Long-term Impact of FDI-Corruption Interaction on Domestic Investment in Nigeria

Over the past three decades, Nigeria has experienced unstable domestic investment and foreign direct investment inflows, and the country continues to face rising corruption and related problems. An ARDL technique has been adopted to explore the long-term FDI’s impact on domestic investment including evaluating if the FDI-domestic investment nexus is dependent on the control of corruption in Nigeria over this period. The bounds test result shows an evidence of a long-term relation amongst FDI, domestic investment and corruption control (including GDP per capita, lending rate, exchange rate and oil price). We find that increasing inward FDI reduces (crowd-out) domestic investment and greater corruption control (lowering corruption) leads to a higher domestic investment in Nigeria over the long-term. Also, the influence of FDI on domestic investment depends on (or varies with) the control of corruption. FDI crowd-in domestic investment at greater corruption control than at lesser corruption control in the long-term. Other significant long-term influencers of domestic investment are the exchange rate and oil price. Given these outcomes, the study offers some recommendations to boost domestic investment in Nigeria.

Effect of exchange rate uncertainty, energy prices and sectoral spending on agriculture value added, household consumption, and domestic investment

The agricultural value chain is underpinned by the interdependence of agricultural value added, household consumption and domestic investment. Understanding the complex interactions between these microeconomic outcomes and the uncertainties in the macroeconomic variables of exchange rates, energy prices and sectoral spending remains under-researched. Therefore, this study examines the impact of exchange rate, energy prices and sectoral spending on agricultural value added, household consumption and domestic investment in Nigeria from 1981 to 2020. Using Kernel regularized least squares (KRLS), the results show that the average pointwise marginal effects of exchange rate and agricultural spending are positive, while the average pointwise marginal effect of energy price is significantly negative for the agricultural value-added model. The results also show that the exchange rate, energy prices and agricultural expenditure all have a positive effect on household consumption. Regarding domestic investment, the effect of the exchange rate is positive and statistically insignificant, while the effects of energy prices and agricultural expenditure are negative and statistically significant. The study recommends the need to strengthen the social safety nets currently in place in Nigeria to support households that are vulnerable to exchange rate fluctuations. In addition, incentives should be given to households and farmers to help use renewable energy sources such as solar or wind power for agricultural activities. Also, investment in value chains and agribusiness initiatives should be encouraged rather than just in crop production.

Macroeconomic Determinants of Domestic Investment in Nigeria: Comparing Theory and Empirics

This article examined the macroeconomic determinants of domestic investments in Nigeria in the light of mainstream investment theories using annual data from 1982 to 2020. We adopt an Autoregressive Distributed Lag (ARDL) model to examine the long run and short run relationships between the dependent and the explanatory variables. From the reviewed economic theories, we identified interest rate, output, savings, government expenditure, money supply, stock market performance and inflation as macroeconomic determinants of investment which we used as explanatory variables in our model. The findings of this study shows that government expenditure, money supply and inflation were significant determinants of investment in the short run while all the variables except interest rate were significant determinants of investment only in the long run. Interest rate was not significant as a determinant of investment within the period of study. The findings of this study add credence to most of the various economic theories reviewed. It shows that investment in Nigeria can be significantly driven by policies because the identified macroeconomic determinants of investment in Nigeria are variables that the policy authorities can influence through policy decisions. We recommend among other things, improvement in financial intermediation and the involvement of domestic firms in the execution of government projects.

Impact of Financial Deepening on Domestic Investment in Nigeria

This study investigated the impact of financial deepening on domestic investment in Nigeria. The time scope of the study covered the period 2005-2022. The response variable was domestic investment (DI) while the treatment variables were financial deepening indicators (broad money supply, private sector credits, and stock market capitalization. The specific objectives were to investigate the impact of credits to private sector on domestic investment in Nigeria; determine the impact of broad money supply on domestic investment in Nigeria; examine the impact of stock market capitalization on domestic investment in Nigeria; and ascertain the impact of monetary policy interest rate on domestic investment in Nigeria. The study adopted ex post facto research and employed the ARDL technique to analyze the data. Diagnostics and stability tests were applied (unit root, CUSUM and CUSUM of squares). the findings of the study indicated the series to be stationary but of mixed order 1(0) and 1(1); while the cointegration test showed evidence of long-run relationship. The long-run coefficients (of the ARDL) estimation indicated broad money supply has significant positive impact on domestic investment; private sector credit has significant positive impact on domestic investment; and the stock market capitalization has significant positive impact on domestic investment. However, the interest rate indicated to be negative on domestic investment. The policy implication of these findings impinges on government and authorities in the financial sector to develop a roadmap to further deepen the financial space to drive growth in domestic investment. Based on the findings, the study recommended that the financial authority should strategize to satisfy the demand for business investment funds by expanding the broad money supply and the private sector credits. Also, the monetary policy interest rate should be reviewed down in order to reverse its negative effect on investments.

An Empirical Investigation of the Nexus Among Foreign Portfolio Investment, Stock Market Growth and Domestic Investment in Nigeria

The study investigated the nexus among foreign portfolio investment, stock market growth and domestic investment in Nigeria from 1986 to 2022 using annual time series data. The study was anchored on the theoretical foundations of the foreign capital movement and the Tobin’s Qtheory of investment. The employed the Structural Vector Autoregressive (SVAR) to analyze the data. Findings of the study revealed that, there is a positive pass-through effect of foreign portfolio investment to domestic investment through the stock market growth in Nigeria. The study concluded that, foreign portfolio is important in stimulating domestic investment in Nigeria. Based on these findings, the study made the following recommendations. The government through the ministry of trade and investment in conjunction with the Central Bank of Nigeria (CBN) and the Security and Exchange Commission (SEC) should create market access by liberalizing the capital market by expanding the shareholdings of the foreign investors beyond the existing 10% to attract more inflows of foreign portfolio investment. Second, to retain foreign portfolio investment and avoid frequent investment rebalancing in the stock market, the government through the National Assembly should enact laws that ensure transparent regulatory framework in the stock market in the country. This would enable foreign investors to have a clear understanding of the rules and procedures governing their investments, as well as the regulatory framework in which they operate. This requires strong legal frameworks that safeguard investors’ rights, ensure fair treatment, and provide dispute resolution mechanisms.

Exchange Rate Depreciation and Gross Domestic Investment in Nigeria

Exchange Rate Depreciation and Gross Domestic Investment in Nigeria

Long-Term Asymmetric Impact of VAT on Domestic Investment in Nigeria

We employ a non-linear ARDL (NARDL) technique to explore long-term asymmetric influence of value added tax (VAT) on domestic investment using quarterly data for Nigeria from 1994 to 2021. A long-term relation was found between domestic investment and VAT (alongside lending and inflation rates, credit to private sector, exchange rate, openness and households’ consumption expenditure) based on the bounds test to cointegration. We uncovered a long-term asymmetric association between domestic investment and VAT. The results show that a positive shock (an increase) in VAT has a long-term decrease and significant influence on domestic investment, while a negative shock (a decrease) in VAT has an insignificant positive influence on investment during the long-term. Other significant long-term drivers of domestic investment are credit to private sector, inflation and lending rates, openness, exchange rate and households’ consumption expenditure. Some recommendations have been offered based on the empirical outcomes.

Dynamics of capital flight components and domestic investment in Nigeria

Capital flight can cause challenges regarding the domestic availability of financial resources in sustaining domestic investment in Nigeria. The purpose of this study is to examine the connection between capital flight components and domestic investment in Nigeria. The study employed the autoregressive distributive lag model (ARDL) to analyze the time series data for Nigeria spanning from 1981 to 2018. The study found that changes in external debt, current account balance, and foreign direct investments have a negative effect on domestic investments in the short run and long run. Furthermore, the results obtained show that the intercept has a positive effect on domestic investment. The long-run coefficient of current account balance has a positive effect, while the other components of capital flight – foreign direct investment, external reserves and external debt – have a negative effect on domestic investment. The error correction coefficient is significant and conforms to the a priori expectation. Hence, the study concludes that growth in domestic investment can be achieved by regulating the components of capital flight within the desirable limits. The study recommends that emphasis should be placed on the components of capital flight to stimulate domestic investment for economic growth.

Foreign Aid, Domestic Savings and Investment: Implications for Nigeria

The study examined the implications of foreign aid on domestic savings and investments in Nigeria. The scope of the study covered a period from 1987 to 2019. The hypotheses were tested using the E-view statistical software adopting the Ordinary Least Square (OLS) method on the regression models adopted. The signs and significance of the regression coefficients and the probability were relied upon in explaining the nature and influence of the independent variable on the dependent variable as to determine both magnitude and direction of impact. In the analysis we relied on the following statistical tools; Correlation Coefficient (R), Coefficient of Determination (R2), probability and the student (t) test. The hypotheses were tested at 0.05 (5%) level of significance. Results of the findings revealed that: Foreign aid had positive and significant impact on Gross Domestic Product (GDP), Foreign aid had positive and significant impact on domestic savings and Foreign aid had positive and significant impact on domestic investment in Nigeria within the period under review. The study concluded that, the contribution of foreign aid to growth can be magnified if Nigeria focuses on implementing effective macroeconomic policies. It is therefore recommended that, policies that strengthen the state and its institutions such as institutional development, human capital development, investment targeting, diversification of the Nigerian economy, a stable and trust worthy political environment, monitoring and evaluation on the use of aid funds and other aid-friendly domestic policies should be promoted

Asymmetric effects of capital flight on domestic investment in Nigeria: evidence from non-linear autoregressive distributed lag model

Economic theory prescribes that domestic investment is a decreasing function of capital flight. However, is there a possibility that reversals in capital flight might lead to a decline in investment levels in Nigeria? Put differently, is there a tendency for domestic investment to maintain a downward spiral, a ratchet effect, even in the face of lower levels of capital flight? Extant literature on capital flight in Nigeria is silent on this enquiry. This study is therefore a modest first attempt at investigating these possibilities. Employing the non-linear autoregressive distributed lag model, the study finds evidence of asymmetric impact of capital flight on investment undertaken at the national level. However, investment by subnational governments revealed the existence of symmetry, while overall, total public sector investments (by both States and Federal Governments) indicated the existence of asymmetric effects between positive and negative deviations of capital flight. The paper re-echoes the need for the strengthening of institutions and policy measures that go beyond the conventional in tackling capital flight.

Domestic Investment, Foreign Direct Investment and Macroeconomic Stability in Nigeria

This study examines the relationship between the two major investment components (domestic investment and foreign direct investment) and macroeconomic stability in Nigeria. In order to capture the macroeconomic stability, some selected macroeconomic variables are presented, namely: real GDP growth rate (RGDPgr), trade openness (TOP), exchange rate (EXR), inflation rate (INFR), interest rate (INTR), private sector credit (PSC) which represent domestic variables and world oil price (WOP) which represent foreign variable. The study employs Johansen cointegration and Vector Autoregressive model as the estimation techniques. Findings from the study reveals that there is no long-run relationship between the selected macroeconomic variables and the two investment variables. The study also reveals that shocks and fluctuations from real GDP growth rate (RGDPgr), private sector credit (PSC), inflation rate (INFR), interest rate (INTR), exchange rate (EXR) and world oil price (WOP) strongly and significantly affect domestic investment in Nigeria; while the shocks and instabilities arising from real GDP growth rate (RGDPgr), inflation rate (INFR), interest rate (INTR), exchange rate (EXR), trade openness (TOP) and world oil price (WOP) majorly and significantly affect foreign direct investment in Nigeria during the period under review. The study therefore recommends that Nigerian government should provide stability measures in all the aforementioned macroeconomic indicators, as this will attract a higher level of FDI and this will create an enabling business environment for domestic investment to operate.

Crowding-Out and Crowding-In Effects of Public Borrowing on Private Domestic Investment in Nigeria

Crowding-Out and Crowding-In Effects of Public Borrowing on Private Domestic Investment in Nigeria

International Remittances and Private Domestic Investment in Nigeria: A Toda and Yamamoto Causality Approach

International Remittances and Private Domestic Investment in Nigeria: A Toda and Yamamoto Causality Approach

Monetary Policy and Domestic Investment in Nigeria: The Role of the Inflation Rate

Abstract Economic theory suggests that monetary policy can be used to stabilize an economy. However, the ability of monetary policy targets—interest rates and money supply—to stabilize an economy depends on their ability to achieve price stability. Using data from 1981 to 2018 and applying the vector error correction model, this paper seeks to determine how the changes in the inflation rate affect the ability of monetary policy tools to stabilize the Nigerian economy and stimulate investment. Empirical results suggest that the impact of the interest rates on investment depends on the level of the inflation rate. The size of the effect of interest rates on investment gets weaker as the inflation rate increases suggesting that monetary policy tools, such as the monetary policy rate (MPR), that directly change the interest rates are robust stabilization tools during periods of declining inflation rates but not relevant during periods of rising inflation rates. This is attributable to low bank lending rates. Additionally, the impact of the money supply target on investment does not depend on the level of the inflation rate. This suggests that monetary policy tools, such as open market operations, that directly change the money supply can be relevant stabilization tools during economic booms and recessions. As a result, the Central Bank of Nigeria should work to deepen the scale, capacity, and efficiency of its open market operations by ensuring that most of the people can participate with minimal transaction cost and by making different financial instruments available.

IMPACT OF EXCHANGE RATE FLUCTUATIONS ON DOMESTIC INVESTMENT IN NIGERIA (1986-2017)

The major objective of this study is to analyze the impact of exchange rate fluctuations on domestic investment in Nigeria, using annual data covering the period 1986–2017. Time series data on domestic investment, gross domestic product, interest rate, financial deepening and exchange rate were obtained from the Central Bank of Nigeria Statistical Bulletin 2017 edition. The technique of Autoregressive distributed lagged modeling (ARDL) is adopted to examine the time series data. Findings reveal that the relationship between exchange rate fluctuations and domestic investment in Nigeria is negative. However, exchange rate fluctuation has no significant impact on domestic investment in the long run p(t) value 0.6201> 0.05) and short run p(t) value 0.6244 > 0.05). The study suggests that monetary authorities in Nigeria should strive for currency swap agreements with other nations that trade heavily with Nigeria, for example, India, Turkey, United Kingdom. This would help in mitigating the effects of currency fluctuations in the foreign exchange market. KEYWORDS: Domestic investment, Exchange rate fluctuations, ARDL, GDP

An econometric analysis of the impact of taxation on domestic investment in Nigeria

An econometric analysis of the impact of taxation on domestic investment in Nigeria

Tax revenue and private domestic investment: Evidence from Nigeria

This paper investigated the impact of tax revenue on private domestic investment in Nigeria from 1980 to 2018 using the modified ordinary least squares- Autoregressive distributed lag (ARDL). The paper used oil revenue, non-oil revenue, and Corporate Income Tax (CIT) as the independent variables while Private Domestic Investment (PDI) is the dependent variable. Oil revenue and non-oil revenue were used as a proxy for oil and non-oil tax. These data were obtained from secondary sources- central Bank of Nigeria, World Bank database and Federal Inland Revenue service statistical bulletin. The result showed that a long-run relationship exists between the aforementioned variables. Also, the paper revealed that oil and non-oil do not have a significant impact on PDI but CIT has a positive and significant impact on PDI. The paper recommends that proper measures/reforms should be put in place in order to reduce the impact of tax on private domestic investment in Nigeria.

Tax revenue and private domestic investment

This paper investigated the impact of tax revenue on private domestic investment in Nigeria from 1980 to 2018 using the modified ordinary least squares- Autoregressive distributed lag (ARDL). The paper used oil revenue, non-oil revenue, and Corporate Income Tax (CIT) as the independent variables while Private Domestic Investment (PDI) is the dependent variable. Oil revenue and non-oil revenue were used as a proxy for oil and non-oil tax. These data were obtained from secondary sources- central Bank of Nigeria, World Bank database and Federal Inland Revenue service statistical bulletin. The result showed that a long-run relationship exists between the aforementioned variables. Also, the paper revealed that oil and non-oil do not have a significant impact on PDI but CIT has a positive and significant impact on PDI. The paper recommends that proper measures/reforms should be put in place in order to reduce the impact of tax on private domestic investment in Nigeria.

Capital Flight and Domestic Investment in Nigeria: Evidence From ARDL Methodology

Capital flight is a challenge for many developing countries of the world. The problem is more severe in a nation like Nigeria where domestic investment has been terribly affected. This study undertakes an empirical investigation of the impact of capital flight on domestic investment in Nigeria between 1980 and 2017. Deploying the Auto Regressive Distributed Lag (ARDL) econometric methodology, the study finds that capital flight has negative and significant impact on domestic investment. In particular, the long run impact of capital flight on domestic investment (0.57) turns out to be more severe than its impact in the short run (0.27), implying that a continuous and persistent build-up of capital flight exerts a negative cumulative effect on domestic investment over time. The study further reveals that the quality of institutions in Nigeria is a disincentive to domestic investment. It therefore recommends the strengthening of institutions to rein in on the illegal outflow of capital from the Nigerian economy in order to guarantee the availability of investible funds. The real sector of the local economy must be grown to bolster the value of the naira. This will stem the tide of capital flight and attract investments into critical sectors.