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Rivers State University, Port Harcourt.
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| Title: | Determinants Of Private Domestic Investment In Nigeria |
| Author(s): | NYECHE Ezebunwo & NEMETA O. Lawal |
| Abstract: | This study examined the determinants of private domestic investment in Nigeria between 1990 and 2020. Gross capital formation was used as a proxy for private domestic investment. Thus, the effects of interest rate, price level and government capital expenditure on gross capital formal was examined. The data for the variables were obtained from the Central Bank of Nigeria Statistical Bulletin and World Development Indicators and analyzed using descriptive statistics, unit root and cointegration tests as well as parsimonious error correction model (ECM). The unit root test results showed that all the variables are stationary at first difference, which implies that they all integrated of order one. The Johansen cointegration test results showed that gross capital formation has long run relationship with interest rate, price level and government capital expenditure. The parsimonious ECM showed that the first lag of interest rate has a significant and negative effect on gross capital formation. Thus, 1 percent increase in interest rate will lead to 0.7144 percent decrease in gross capital formation. At the same time, the price level has a negative and significant effect on gross capital formation. The result indicates that gross capital formation will decrease by 0.1028 percent following 1 percent increase in the price level. On the other hand, the current and lagged value of government capital expenditure has significant positive effects on gross capital formation. It was found that gross capital formation will increase by 1.2192 percent as current government capital expenditure increases by 1 percent. The result also revealed that 1 percent increase in the first lag of government capital expenditure will boost gross capital formation by 0.6604 percent. Owing to the findings, this study recommends among others that monetary authorities should ensure that interest rate remains investment friendly to increase the availability of funds to investors and create more opportunities for the growth of private domestic investment in Nigeria. |
| Keywords: | Gross capital formation, Government capital expenditure, interest rate, Price level |
| Journal: | Economic and Social Science Review (ESR) |
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