The Relationship between Domestic Investment and Economic Growth in Nigeria

Abstract

This study aims at investigating the relationship between domestic investment and economic growth in Nigeria using secondary time series data set sourced from Central Bank of Nigeria (CBN) Statistical Bulletin for the year 2010. The data set has been analysed using STATA Version 9.1. This data set covers the period of 30 years, 1981 to 2010. Non probability sampling method in the form of availability sampling technique has been used in selecting the number of years that constitutes the sample size of this study. This technique has been applied due to availability of the relevant data for the selected years only. From the cointegration results, it is clear that there is a significant long run positive relationship among domestic investment, exports and economic growth in Nigeria. For the short run relationship, the results of Granger causality test indicate a significant feedback causality running from domestic investment to economic growth and vice versa in the short run. In addition, in the short run, there is a significant negative bidirectional relationship between domestic investment and exports in Nigeria. Nonetheless, the findings indicate no short run causal relationship between exports and economic growth. The findings of this study therefore have the following implications: first, economic growth should be strengthened in order to achieve high level of domestic investment both in the short and long runs. Furthermore, although export does not have any significant influence on economic growth in the shot run, such influence exists in the long run. Therefore, measures that will ensure exports promotion should be adopted.