Of Private Investment In Nigeria (An Econometric Analysis)

Abstract

This paper discusses the determinants of private investment in Nigeria from 1970 – 2012. It x- rays the trend in Nigerian investment behaviour and reviews policy options to increase Private domestic investment. The structure for analysis involves the estimation of an investment rate function derived from the Life Cycle Hypothesis while taking into account the structural distinctiveness of a developing economy. The study employs the Error-Correction modeling procedure which minimizes the likelihood of estimating spurious relations, while at the same time retaining long-run information. The results of the analysis show that the investment rate is positively correlated with both the growth rate of disposable income and the real interest rate on bank deposits. We discovered that investment has been slowed down in Nigeria as a result of increased lending rate, reduced public expenditure, reduced savings, political instability and inadequate infrastructure. We recommend among others things that the focus of development policy in Nigeria should be to increase the productive base of the economy in order to promote real income growth and reduce unemployment. For this to be achieved, a diversification of the country’s resource base is indispensable.