Private Investment In Nigeria Research Articles

Determinants of Private Investment in Nigeria

This study investigates the determinants of private investment in Nigeria. Employing time series data for the period 1990 to 2020 gotten from the Central Bank of Nigeria Statistical Bulletin and World Development Indicators, the Auto-Regressive Distributed Lag Model (ARDL) and the Error Correction Mechanism estimation techniques were used to test private investment as the dependent variable and interest rate, money supply, credit to the private sector, inflation rate, and regulatory quality index as the independent variables. The results showed that all variables were correctly signed, and had statistical significance in explaining private investment in Nigeria during the period of study. The study, therefore, encouraged low interest rates to support and enhance lending to the private sector needed for investments, a control of rising inflation rate, monetary authorities developing and implementing policies to increase credit allocated to the private sector, creating and implementing sound policies and laws to support and encourage private sector development as recommendations.

Domestic and Foreign Debt Dynamics and Nonlinear Effects on Private Investments in Nigeria: Evidence with Asymmetric ARDL and Causality

The ultimate goal of the study was to determine the asymmetric and dynamic effects of public debt on private investment in Nigeria from 1990 to 2019. Because of the nature of data stationarity, the study then adopted the Nonlinear Autoregressive Distributed Lag (NARDL) modelling technique, which can produce both long-run and short-run parameter estimates of negative and positive decomposed values of domestic and foreign investment. The study used the Augmented Dickey-Fuller (ADF) test to ascertain the true order of integration for the study variables. The findings for the NARDL model showed a stable long-run cointegration among private investment, domestic debt, foreign debt, economic growth, inflation and real exchange rate for the study period. The results show an asymmetric relationship between domestic and foreign debts and private investments in the long run. The estimated results further show that private investment is a significant positive function of positive and negative changes in foreign debt, and a significant negative function of positive and negative changes in domestic debt in the long run, while there were significant instant positive s on impacts on domestic and foreign debt shocks in the short-run.

Effect of military spending on private investment in Nigeria: does a crowding-out effect exist?

This study adopts ARDL and VAR estimation methods to examine whether military spending crowd-out or crowd-in private investment in Nigeria. We use the data that covers the period from 1970 to 2019. Our results, based on the ARDL method, show that military spending only crowds-out private investment in the short run. In the long run, military spending crowds in private investment. The results are robust to the use of alternative estimation methods. Specifically, IRF results show that military spending has a contemporaneous negative effect on private investment. However, the negative effect turns positive after the third period. Also, FEVD results show that most of the variation in private investment is explained by its shock and few by military spending. Our findings have policy implications. While it is advisable to spend more on the military to curtail the activities of insurgents, bandits and kidnappers and to restore confidence in investors, it is important also to take cognisance of the fact that military spending can crowd out private investment.

An Empirical Analysis of Monetary Policy Transmission Instruments and Non-oil Real Sector Private Investment in Nigeria

In recent times, the performance of Non-oil real Private investment in Nigeria has remained suboptimal. This has been generally attributed to ineffective monetary policy, among others. This study therefore examines the impact of selected Monetary Policy transmission instruments namely: Monetary Policy Rate (MPR), Cash Reserve Ratio, (CRR) Liquidity Ratio, (LR) and Foreign Exchange Rate (NFXR), on Non-oil Real Sector Private Investment (NRSPI). The time series data is sourced from CBN, spanning through a period of 1981 to 2020. Johansen Co-integration and Error correction model (ECM) econometric analysis was employed.The empirical findings established that in the long run, inverse and significant relationships exist between (NRSPI) and MPR, LR, and CRR while FXR is positively and significantly related. The coefficient of the ECM (-1.16) which measures NRSPI’s speed of equilibrium adjustment to changes in the selected policy instruments, is significant and correctly signed. It suggests that in the long run, NRSPI adjusts slowly to short-run disequilibrium in the selected policy instruments; indicating a lag effect. Overall, the policy instruments do not contribute effectively to NRSPI growth in Nigeria. Therefore, the monetary authorities should lay emphasis on aligning their policy contractionary measures, to reduce adverse effect of these selected instruments, They should maintain optimal lending rate that reflects the overall internal rate of return on investment, with due attention to market fundamentals. Lastly, Policy makers should take into consideration the lag effect, and design policies in line with the magnitude of expected changes.

Effect of Military Spending on Private Investment in Nigeria: Does Crowding-Out Effect Exist?

Effect of Military Spending on Private Investment in Nigeria: Does Crowding-Out Effect Exist?

Monetary Policy and Domestic Private Investment in Nigeria

This paper empirically examined the effect of monetary policy on domestic private investment in Nigeria from 1981 to 2018. In other to achieve our objectives, annual time series data of the dependent variable – domestic private investment (DPI) and independent variables – money supply (MS), government domestic debt (GDD), government domestic savings (GDS), interest rate (INT) and consumer price index (CPI) were collected from secondary sources like CBN Statistical Bulletin and WDI. Thereafter, the data were analyzed using descriptive statistics and the econometrics technique of Vector Error Correction Mechanism (ECM) method of analysis. The results of analysis indicated that a long run relationship exists among the variables. Furthermore, the paper revealed that money supply (MS), government domestic savings (GDS). interest rate (INT) and consumer price index (CPI) have a negative and insignificant effect on domestic private investment in the long run but interest rate is significant at 5%, while government domestic debt (GDD), has a positive and insignificant effect on domestic private investment (DPI) in the long run in Nigeria within the period. Based on the above findings, the paper recommends as follows: Expansionary monetary policy should be formulated that will reduce interest rate, encourage borrowings and savings. This will expand commercial banks and other credit granting financial institutions which will encourage real investment in the economy.

Causal Relationship between Fiscal Policy and Private Investment in Nigeria for the period 1986 -2019

This study investigated the causal relationship between fiscal policy and private investment in Nigeria (1986-2019) using secondary data from Statistical bulletin of Central Bank of Nigeria. The research work used the Granger Causality techniques to test the causal relationship between the independent variables (Tax revenue, Oil revenue, Total expenditure and Public debt) on the dependent variable (Private Investment) while VAR was used to test the short run relationship. The study found that fiscal policy instruments granger causes private investment in Nigeria within the period of the study. The study therefore advocates that Government should as necessity fully liberalized or privatized NNPC and the Power sector as these critical sectors will help the growth of the private sectors and reduce unemployment in the country. Nigerian Government ought to increase its spending on infrastructure, especially capital projects in the economy in order to bridge infrastructure gap in the country. Provision of tax incentives to private sectors by the Government should be encouraged, as this will help the growth of private investment in the country. Also, restructuring of the economy by manufacturing what we need should be encouraged by government because exporting commodity (raw material) means exporting jobs.

MACROECONOMIC EFFECTS OF BUDGET DEFICIT IN NIGERIA

This study probed the macroeconomic effects of budget deficit in Nigeria. Specifically, it seeks to probe the effect of budget deficit on private investment and public investment in Nigeria by adopting the ADF unit root test and ARDL model, Granger Causality test and the short-run diagnostics and stability using annual time series data covering 37 years from 1981 to 2019. The variables employed include – Growth rate of real gross domestic product, private investment (Gross Fixed Capital Formation) as a percentage of GDP, public investment measured as ratio government capital expenditure to GDP, budget deficit, money supply measured as ratio of GDP, inflation rate measured by annual year-on-year inflation rate, interest rate, labour force participation rate. The research findings admitted that, budget deficit have positive and significant impact on economic growth in Nigeria. Therefore, government budget deficit has no crowding out effect on investment. The study also reveals that budget deficit has negative and insignificant impact on private investment in Nigeria. In addition, further investigation shows budget deficit have positive and significant impact on public investment in Nigeria. Also, the study asserts that there is unidirectional causality running from budget deficit to economic growth, private investment and public investment. Based on the research findings of this study, Government must ensure and maintain strong fiscal discipline without compromising the wellbeing of the citizenry by allocating budget spending to sectors that can translate the deficit into high economic growth both in the short and long runs. Furthermore, budget deficit financing in Nigeria should be focused on the productive sectors of the economy. This is because deficit financing has merely resulted in economic instability indicating that sound policies are needed to achieve economic stability in Nigeria.
 
 JEL: E02, H61, E22
 
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Domestic Debt and Private Investment: The Case of a Small Open Economy

According to the Debt Management Office (DMO) Nigeria's total debt stock (foreign and domestic) as at June 2020 stood ₦31.01 trillion (US$85.9 billion), 8.31 percent increase when compared with ₦28.63 trillion (US$79.3 billion) recorded in March 2020. A breakdown reveals that total external debt stood at ₦11.36 trillion (US$31.47 billion), accounting for 36.65 percent of the total debt stock while domestic debts stood at ₦19.65 trillion (US$54.42 billion), represented 63.35 percent of the total debts. A cursory look at the historical trend shows that Nigeria's public debt increased by US$22.09 billion between June 2015 and June 2020. Nigeria spent a whopping US$1.3 billion to cover external debt obligations in 2019 as external debt service payment accumulated to US$3.5 billion in the last five years. In general, the unprecedented increase in the public debt is a source of anxiety for stakeholders in Nigeria. The study investigates the relationship between domestic debt and private investment in Nigeria for the period 2000: Q1–2019: Q2. The paper uses the Augmented Dickey Fuller (ADF) and Philp Perron (PP) tests to examine the statistical properties of the data and determine the appropriate model for the analysis. Also, Autoregressive Distributed Lag (ARDL) methodology to uncover the short and long run relationship between public debt and private investment. The time series data were found to exhibit mixed order of integration, I(0) and I(1), thereby necessitating the choice of the Autoregressive Distributed Lag (ARDL) methodology that allows for data with mixed integration order in modelling the relationships among economic variables. The model was tested for cointegration and the results of the Bounds test showed the existence of a long-run relationship among the variables. From the long-run equation, domestic debt, real GDP and prime lending rate were statistically significant and maintained a priori expectation. The study affirms that domestic debt has a significant negative effect on private investment in Nigeria, confirming the crowding-out hypothesis. On the basis on the empirical findings, the study recommends minimizing public borrowing (especially from domestic sources) in Nigeria. In addition, funds sourced through borrowing should be judiciously utilized to improve the investment climate in the country.

Interrelationship Between Fiscal Deficit, Aggregate Savings and Investment: A Test of Ricardian Equivalence Hypothesis in Nigeria

Conflicting results on the relationship between government fiscal deficit, savings and investment behaviour of households remains unresolved. Some authors have argued that households might unconsciously play out adherence to the dictates of the Ricardian equivalence hypothesis (REH) because they practice an infinite consumption horizon. Relying on the vector autoregression (VAR) technique and the impulse response function (IRF), this study examines the validity of the REH and the interactions between fiscal deficit, aggregate savings, and private investment in Nigeria within a 48-year period. The results reveal that government fiscal deficit exerts negative effects on gross domestic savings and investment, which is further affirmed by the impulse response function (IRF). These findings rather uphold the neoclassical literary arguments that economic growth is retarded due to crowding out effects resulting from fiscal deficits; hence opposing the REH. Thus, policy-makers should adhere to the fiscal deficits benchmark of less than 40 percent of GDP as proposed by the International Monetary Fund (IMF) to maintain stable macroeconomic conditions.
 JEL Classification: E62, E21-E22, E23

Revisiting Government Expenditure and Private Investment Nexus: An ARDL Approach

This paper re-examines the nexus between government expenditure and private investment in Nigeria over the period of 1981-2016. The study is rooted on Jorgenson’s theory of investment, the Samuelson’s version of the flexible accelerator theory and Keynesian-classical crowding-in/crowding-out theory of investment. The resulting empirical models comprise three equations; one each for private investment (PI), private domestic investment (PDI) and foreign direct investment (FDI). The study employed Autoregressive Distributed Lag technique to estimate the models. From the study, government expenditure showed positive impact on private investment in Nigeria. Our specific findings showed that: Federal government’s capital expenditure (CAEX) showed positive and significant impact on both PI and PDI in the long run: a N1.00 billion each increase in CAEX increases PI and PDI by N0.12 and N0.238billion respectively. CAEX showed negative but insignificant impact on FDI in both short and long run. State government’s capital expenditure (SCEX) showed positive and significant impact on PI: A N1.00 billion increase in SCEX increases PI by N0.27 billion. Federal government’s recurrent expenditure (REEX) showed positive and negative impact on FDI and PI respectively: A N1.00 billion increase in REEX increases FDI by N1.27 billion, and reduces PI by N0.28 billion. Our findings imply that, if the objective of government policy is to raise private investment or private domestic investment, then both the Federal Government and state governments should boost their capital expenditure.

Government Capital Expenditure and Private Sector Investment in Nigeria: Co-integration Regression and Toda-Yamamoto Causality Analysis

This paper analyses the relationship between government capital expenditure and private investment in Nigeria using time series data spanning from 1981 to 2016. Government capital expenditure was disaggregated into different components and ADF unit root test was employed to establish the stationarity properties of the variables in the model. The result of Johanson co-integration test revealed that the variables have long run relationship. Co-integration regression results suggested that capital expenditure on physical assets and defense displaced private sector investment while government capital expenditure on human capital and public debt servicing promote private sector investment in Nigeria. Furthermore, the results of T-Y causality revealed the bidirectional causality private sector investment and government capital expenditure in Nigeria. Based on these findings, the paper recommends that government capital expenditure should be channel to human capital in order to promote private sector investment in Nigeria. In addition, the Nigerian government should pay more attention to capital expenditure on physical assets since it has a significant impact on private sector investment. Lastly, Nigeria government should address the issue of budget delay, corruption, and mismanagement in Nigerian institutions.

Macroeconomic Variables and Private Investment: A Two Dimensional Study from Nigeria Economy

The study investigated the impact of macroeconomic variables on private investment in Nigeria for the period 1990 to 2016. To achieve these objectives, the study tests for the study modeled private equity and private real investment as the function exchange rate, financial sector development, and interest rate, openness of the economy, real gross domestic product, inflation rate and broad money supply. Ordinary least square method of data analysis was used.
 From model one, the study found that real gross domestic product have positive but insignificant effect, openness of the economy have positive and insignificant effect, interest rate have positive and significant effect, financial deepening have positive and insignificant effect while interest rate, inflation rate and exchange rate have negative effect on private real investment. The coefficient of determination (R2) proved that the independent variables can explain 62 percent variation on private real investment; the f- statistics found that the model is significant while the Durbin Watson statistics proved the presence of serial autocorrelation. The effect of macroeconomic variables on private equity investment was presented in model two. The study found that openness of the economy; real gross domestic products, broad money supply, and interest rate have negative and insignificant effect on private equity investment except openness of the economy with significant effect. Inflation rate, financial sector deepening and exchange rate have positive and insignificant effect on private equity investment except financial deepening with significant effect. The R2 proved that the independent variables can predict 66.9 percent variation on private equity investment. The f- statistics found that the model is significant while the Durbin Watson statistics proved the presence of serial autocorrelation. We conclude that macroeconomic variable have significant effect on private investment in Nigeria. We recommend that interest rate must be able to encourage higher private investment by increasing the real interstate on private savings or household savings so that larger amount of income would be saved to accumulate more capital and hence private investment. Policies should be formulated by investors and government to discourage factors that affect negatively private investment.

Macroeconomic Variables and Private Investment: A Two Dimensional Study from Nigeria Economy

The study investigated the impact of macroeconomic variables on private investment in Nigeria for the period 1990 to 2016. To achieve these objectives, the study tests for the study modeled private equity and private real investment as the function exchange rate, financial sector development, and interest rate, openness of the economy, real gross domestic product, inflation rate and broad money supply. Ordinary least square method of data analysis was used. From model one, the study found that real gross domestic product have positive but insignificant effect, openness of the economy have positive and insignificant effect, interest rate have positive and significant effect, financial deepening have positive and insignificant effect while interest rate, inflation rate and exchange rate have negative effect on private real investment. The coefficient of determination (R2) proved that the independent variables can explain 62 percent variation on private real investment; the f- statistics found that the model is significant while the Durbin Watson statistics proved the presence of serial autocorrelation. The effect of macroeconomic variables on private equity investment was presented in model two. The study found that openness of the economy; real gross domestic products, broad money supply, and interest rate have negative and insignificant effect on private equity investment except openness of the economy with significant effect. Inflation rate, financial sector deepening and exchange rate have positive and insignificant effect on private equity investment except financial deepening with significant effect. The R2 proved that the independent variables can predict 66.9 percent variation on private equity investment. The f- statistics found that the model is significant while the Durbin Watson statistics proved the presence of serial autocorrelation. We conclude that macroeconomic variable have significant effect on private investment in Nigeria. We recommend that interest rate must be able to encourage higher private investment by increasing the real interstate on private savings or household savings so that larger amount of income would be saved to accumulate more capital and hence private investment. Policies should be formulated by investors and government to discourage factors that affect negatively private investment.

FISCAL POLICY MANAGEMENT AND PRIVATE INVESTMENT IN NIGERIA

The Nigerian government over the years embarked on diverse macroeconomic policy options to tinker the economy on the path of growth and development. Amongst the policy options readily employed is that of fiscal policy. Despite the lofty place of fiscal policy in the management of the Nigerian economy, the economy is yet to come on the path of sound growth and development. The intent of fiscal management is essentially to stimulate economic and social development by pursuing a policy stance that ensures a sense of balance between taxation, expenditure and borrowing that is consistent with sustainable growth. However, the extent to which fiscal management engenders private investment continues to attract theoretical and empirical debate especially in developing countries like Nigeria. In light of this, the present study fills the gap by examining the relationship between fiscal management and private investment in Nigeria between 1987 and 2015. The study employed ex-post facto research design. Secondary time series data were used for the study and these were sourced from CBN statistical bulletin and World Development Indicators, 2015. The data collected were analyzed using the Autoregressive Distributed Lag with inferences drawn at 5% significance level. The result of the relationship between fiscal management and private investment in Nigeria showed that inflation, capital expenditure, indirect tax and non-tax revenue had positive and significant effects on private investment (β=0.02, t=19.04; β=0.59, t=40.13; β=1.70, t=17.07; β=1.05, t=22.03 respectively) in Nigeria, while domestic credit to private sector had negative but significant effect on private investment (β = -0.09, t = -17.26) in Nigeria within the period. The study concluded that a crowding-in relationship exists between capital expenditure and private investment, while indirect tax revenue has significant and non-distortionary relationship with private investment. The study therefore recommends more public investment in capital projects and that the tax system should generally be made favorable towards private sector investment.

An Empirical Examination of the Determinants of Private Investment in Nigeria.

The study investigates the determinants of private investment in Nigeria, employing the Autoregressive Distributed Lag framework on data from 1980 to 2016. In all, the study provides evidence that real gross domestic product, public investment, real interest rate, real exchange rate, credit to private sector and external debt both in a short run and long run significantly affect the level of private investment, except for inflation which was insignificant. Our study revealed that real gross domestic product play an increasingly important role in supporting the nation’s growth in private investment. The study recommends that government should give more priorities to expenditures that compliment (crowd in) private investment: such as capital expenditure. Also since previous exchange rate policies are most likely to spur and speedup the growth and development of the domestic industries and also it has the likelihood to increase investment in this sector. Therefore, necessary adjustments need to be effected for the proper positioning of present exchange rate policies to encourage the investors and investment in the domestic economy. Keywords: Private investment, Real Gross Domestic Product, Real Interest Rate, Real Exchange Rate, Credit to Private Sector DOI : 10.7176/JESD/10-2-11

Effects of Public Expenditure On Economic Development In Nigeria.

This study examined the effect of public expenditure on economic development in Nigeria for the period 2000–2015. Ordinary Least Square (OLS) multiple regression model was employed on the perceived causal relationship between public expenditure and economic development. The study revealed that capital expenditure on Economic Services and recurrent expenditure on administration exerted positive and insignificant effect on unemployment rate in Nigeria while public expenditure on social and community service exerted negative and insignificant effect on unemployment rate in Nigeria. Also the study revealed that capital expenditure on Economic Services and Social and Community Services exerted positive and significant effect on private investment in Nigeria while recurrent expenditure on administration exerted negative and significant effect on private investment in Nigeria. In all, the study revealed a significant impact of public expenditure on GDP, unemployment rate and private investment in Nigeria for the period 2000-2015. It is recommended amongst others that capital and recurrent expenditures on economic services should be directed mainly to the agricultural sector. This will stimulate activities in the economic sectors and, perhaps, reverse the negative effect on economic development.

The Impact of Exchange Rate on Foreign Private Investment in Nigeria

The study examined the impact of exchange rate on foreign private investment using quarterly time series date from Nigeria for the period 2007 to 2017. Foreign private investment in the study was disaggregated into foreign direct investment and foreign portfolio investment in order to ascertain their separate reactions to changes in the exchange rate of the naira against the US dollars. The empirical analysis was based on the VAR estimation procedure using three lagged periods adopted on the basis of various lag order selection criteria. The empirical result revealed that devaluation/depreciation of the naira adversely affects foreign direct investment and foreign portfolio investment in Nigeria. Increased in the size of the domestic market and development of the financial sector were found to stimulate foreign private investment while high inflation rate in the domestic economy discourages foreign private investment in Nigeria. The study, therefore, recommended among others that the Central Bank of Nigeria should continue to initiate more proactive policy intervention policies to stabilize the exchange rate of the naira in order to stimulate more foreign private investment in Nigeria.

Effects of Government Expenditure on Private Investment in Nigerian Economy (1980–2016)

This study examined the effect of government expenditure on private investment in Nigeria during the period 1980–2016. The error correction model analysis was used in the study to analyze the relationship between the two variables. The study found that there is a long-run relationship among the variables and that the interest rate and inflation have negative but significant impact on private investment in the long run. On the other hand, government expenditure has positive but insignificant impact on private investment in the long run. In the short run, government expenditure and interest rate have a significant positive impact on private investment in Nigeria, while GDP per capita and inflation negatively impact private investment. The study concluded that there is the need for the government to increase its expenditure particularly on the provision of more infrastructural facilities as this will attract more investment from within and outside the country.

The Impact of Value Added Tax on Private Investment in Nigeria

The Impact of Value Added Tax on Private Investment in Nigeria