Title: Investment Metrics And The Nigerian Economy
Authors: ADIEVUGHWARE, Ochuko Favour And EHIEDU, Victor C Ph.D
Volume: 9
Issue: 6
Pages: 37-50
Publication Date: 2025/06/28
Abstract:
This study examined the effect of investment metrics on the Nigerian economy, with specific focus on Foreign Direct Investment Inflows (FDII), Government Investment Spending (GIS), Private Sector Credit to GDP Ratio (PSCGDPR), and Investment-to-GDP Ratio (IGDPR) as proxies for investment activity. The dependent variable was Nigeria's Real Gross Domestic Product (RGDP), analyzed over the period 1990 to 2024. Utilizing an ex-post facto research design, the study relied exclusively on secondary data sourced from the Central Bank of Nigeria's Statistical Bulletin and Annual Reports. The Autoregressive Distributed Lag (ARDL) model was employed due to the mixed order of integration among variables, allowing for the investigation of both short-run and long-run relationships. A series of diagnostic tests-including Descriptive Statistics, Correlation Matrix, Variance Inflation Factor (VIF), Breusch-Godfrey Serial Correlation LM Test, Breusch-Pagan-Godfrey Heteroskedasticity Test, Ramsey RESET Test, and the Augmented Dickey-Fuller (ADF) unit root test-were conducted to confirm the robustness of the model and validity of assumptions. The ARDL Bounds Test confirmed the existence of a long-run equilibrium relationship among the variables. However, the results revealed that none of the investment indicators had a statistically significant effect on RGDP in either the short run or the long run. FDII recorded a short-run p-value of 0.8923 and a long-run p-value of 0.8920, showing no significant contribution to output. GIS similarly exhibited no significant impact, with short-run and long-run p-values of 0.2488 and 0.2614, respectively. PSCGDPR had a long-run p-value of 0.9305, indicating a complete lack of significance, while the short-run estimate was affected by a formatting irregularity. IGDPR presented a long-run p-value of 0.2625, and its short-run result also showed data inconsistencies. These findings suggest that the presumed growth-enhancing effects of investment in Nigeria have not materialized, likely due to structural inefficiencies, poor absorptive capacity, misallocated resources, and weak financial intermediation. The study concludes that investment-driven growth policies must be supported by institutional reforms and targeted allocation strategies to be effective. It recommends a strategic realignment of public and private sector investment frameworks, prioritizing governance, infrastructure, and productive sectors to unlock Nigeria's economic potential.