Investment Uncertainties and Economic Growth in Nigeria

Abstract

This study investigates the effect of investment uncertainties on economic growth in Nigeria for the period of 1993-2023 (31years). The investment uncertainties wasproxied with Exchange Rate (EXRF), Inflation Rate (INFR), Interest Rate Fluctuations (INTRF), Stock Market Fluctuation (SMKTF), Foreign Direct Investment Inflows (FDII) and Public Debt Ratio (PDR on economic growth proxied with Real Gross Domestic Product (RGDP) in Nigeria.Data for the study was obtained from CBN Statistical Bulletin and World Development Indicators. Data was analyzed using the descriptive statistics, correlation matrix and several diagonistics tests, followed by the unit root test, ARDL Bound Co-integration test, and ARDL Co-integrating and Long form were utilised via Econometric Views version 9.0. The findings revealed mixed effects across these variables. In the short run, EXRF showed a weak effect on RGDP with a coefficient of 0.0208 and a p-value of 0.0938, indicating a statistically significant effect at the 10% level. However, the long-run effect of EXRF is not significant, with a coefficient of 0.3863 and a p-value of 0.1427, suggesting that EXRF do not significantly affect RGDP over the long term. INFR on the other hand, shows a significant positive effect on Nigeria's RGDP in both the short run and long run. The short-run coefficient for INFR is 0.0445, with a p-value of 0.0092, while the long-run coefficient is 0.8270, with a p-value of 0.0231. This suggests that inflation fluctuations significantly affect Nigeria’s economic growth over both timeframes. Similarly, INTRF are found to significantly influence RGDP, with short-run and long-run coefficients of 0.0969 (p-value = 0.0408) and 1.8001 (p-value = 0.0357), respectively. Both short-run and long-run effects of INTR are statistically significant, confirming their crucial role in Nigeria's economic performance. In contrast, SMKTF do not have a statistically significant effect on Nigeria’s RGDP in either the short run or long run. The short-run coefficient for SMKTF is 0.0163 with a p-value of 0.3797, and the long-run coefficient is 0.3029 with a p-value of 0.3061, indicating no significant effect. Similarly, FDII and PDR also do not significantly influence RGDP. The shortrun coefficient for FDII is -0.0006 with a p-value of 0.9783, and the long-run coefficient is - 0.0118 with a p-value of 0.9783. The short-run coefficient for PDR is -0.0020 with a p-value of 0.9476, while the long-run coefficient is -0.0377 with a p-value of 0.9477, suggesting that both FDI and public debt do not significantly contribute to RGDP. The study concluded that investment uncertainties have a mix effect economic growth in Nigeria. Hence, the study recommends that the Nigerian government should implement policies that stabilize the exchange rate, such as strengthening foreign reserves and regulating currency markets.