Empirical Analysis of the Impact of Private Investment on Economic Growth in Nigeria

This study investigates the impact of Private investment on economic growth in Nigeria using the Autoregressive Distributed Lag (ARDL) bounds testing approach. Annual time series data were utilized to estimate both the short-run and long-run dynamics of the relationship between real gross domestic product (RGDP) growth and five explanatory variables: Foreign Direct Investment (FDI), Gross Capital Formation (GCF), Credit to the Private Sector (PSC), Inflation Rate (INF), and Interest Rate (INR). The long-run findings reveal that gross capital formation has a positive and statistically significant impact on economic growth, while credit to the private sector and inflation negatively affect growth. Foreign direct investment and interest rates, although positive, were found to be statistically insignificant in the long run. In the short run, fluctuations in FDI exert a significant negative influence on economic growth, suggesting potential volatility or misallocation of FDI in Nigeria’s economy. Inflation also demonstrated mixed short-run effects but maintained a negative long-run influence on growth. The error correction term (CointEq(-1)) is negative and significant, confirming a strong tendency for the economy to return to long-run equilibrium after short-run shocks. Based on these findings, the study highlights the importance of promoting productive investment, improving credit delivery to the private sector, and maintaining macroeconomic stability to drive sustainable economic growth in Nigeria.