Effect of Selected Macroeconomic Variables on Aggregate Investments in Nigeria

This study investigated the influence of selected macroeconomic variables such as exchange rate, interest rate, and inflation rate on aggregate investment in Nigeria. Using gross fixed capital formation (GFCF) as an indicator for the measure of investment performances, the study used annual time series data which were mainly obtained from the CBN statistical bulletin. The autoregressive distributed lag (ARDL) technique was employed in this study to estimate the relationship among the variables in short run and long run. According to the bounds test, the result showed that there existed a long run cointegration relationship between the selected macroeconomic variables and aggregate investment in Nigeria. It is found that the exchange rate had positive and significant effects on investment. This means that a stable exchange rate would promote investments. On the contrary, the lending rate was found to have negative and significant effects on investment, which means that when borrowing cost is high, then investment will be discouraged. Also, inflation has a slight positive effect on investments. From the error correction model, there was evidence to show that the deviations from the equilibrium process is corrected to some degree along the long-run equilibrium path with the error correction parameter having a value of –0.63. The diagnostic test results revealed no presence of serial correlation and heteroskedasticity. On this basis, therefore, the study infers that macroeconomic stability such as exchange rate stability, moderate interest rate, and low inflation rates are essential for promoting aggregate investments in Nigeria.

Aggregate Investments, Nigeria, Inflation, Interest Rates, Exchange rates

1. Austin, N. N., & Okezie, A. I. (2019). Inflation and Nigerian investment growth: Engle-Granger two-step modelling (EGM) approach. American Based Research Journal, 8(2), 18–27. [Google Scholar] [Crossref]

2. Fashagba, M. O., Atsanan, A., Yadok, N. G., & Adebayo, T. Y. (2019). The effect of inflation on return on investment in Nigeria. Nigerian Journal of Management Sciences, 23(2), 219–227. [Google Scholar] [Crossref]

3. Hansen, A. H. (1951). Business cycles and national income. W. W. Norton & Company. [Google Scholar] [Crossref]

4. Immanuel, T. (2024). Macroeconomic determinants of portfolio investment in ASEAN-5 countries. Asian Economic and Financial Review. [Google Scholar] [Crossref]

5. International Finance Corporation. (2023). Annual report 2023: Creating markets and mobilizing private capital. IFC. [Google Scholar] [Crossref]

6. International Monetary Fund. (2023). World economic outlook: Navigating global divergences. IMF. [Google Scholar] [Crossref]

7. Isaac, S. E., & Akpan, O. M. (2024). Macroeconomic determinants of domestic investment in Nigeria: Comparing theory and empirics. South Asian Journal of Social Studies and Economics, 21(3), 194–203. https://doi.org/10.9734/sajsse/2024/v21i3122315 [Google Scholar] [Crossref]

8. Islam, M., & Wetzel, D. (2019). Real private investment determinants in Ghana. Journal of African Development Studies. 6(4), 24–43. [Google Scholar] [Crossref]

9. Kahn, R. F. (1931). The relation of home investment to unemployment. The Economic Journal, 41(162), 173–198. https://doi.org/10.2307/2223697 [Google Scholar] [Crossref]

10. Khan, M. S., & Reinhart, C. M. (1990). Private investment and economic growth in developing countries. World Development, 18(1), 19–27. https://doi.org/10.1016/0305-750X(90)90100-C [Google Scholar] [Crossref]

11. Maku, O., & Adelowokan, O. (2019). Inflation and government expenditure nexus in Nigeria. Nigerian Journal of Economic Studies. [Google Scholar] [Crossref]

12. Mogaji, O., Falade, A. O. O., & Ogundipe, S. A. (2020). Inflation, interest rate and domestic investment in Nigeria: Auto-regressive distributed lag (ARDL) approach. International Journal of Advances in Engineering and Management (IJAEM), 2(8), 516–525. https://doi.org/10.35629/5252-0208516525 [Google Scholar] [Crossref]

13. Nugent, J. B., & Yotopoulos, P. A. (1979). Economics of development: Empirical investigations. Harper & Row. [Google Scholar] [Crossref]

14. Obaseki, P. J., & Onwioduokit, E. A. (1998). The development of the Nigerian private sector in the context of economic reform. CBN Economic and Financial Review, 36(4), 824–843. [Google Scholar] [Crossref]

15. Omoke, P.C. (2018). Money supply, inflation and output relationship in Nigeria. Central Bank of Nigeria Economic and Financial Review. 4(2), 55-92. [Google Scholar] [Crossref]

16. Onyemaechi, J. O., & Raji, R. O. (2019). Impact of inflation on corporate investment in Sub-Saharan African countries: An empirical analysis of the West-African monetary zone. International Journal of Business and Social Science, 5(8), 189–199. [Google Scholar] [Crossref]

17. Osasu, O., & Sadiq, O. A. (2019). Taxation and inflation in Nigeria: An empirical analysis. Research Journal of Finance and Accounting, 10(4), 91–98. https://doi.org/10.7176/RJFA [Google Scholar] [Crossref]

18. Oyedokun, G., & Ajose, S. (2019). Domestic investment and economic performance in Nigeria. Journal of Development Economics and Finance. 8(6), 33–52. [Google Scholar] [Crossref]

19. Pettinger, T. (2019). What would Keynes do? Octopus Press. ISBN 978-1844039807. [Google Scholar] [Crossref]

20. Ramasamy, B. (2019). Determinants of gross investment in developing countries. International Journal of Economics and Finance. 35(1), 43–57. [Google Scholar] [Crossref]

21. Romer (2019). Endogenous technological change and economic growth. Journal of Economic Perspectives, 8(1), 3–22. [Google Scholar] [Crossref]

22. Toby, J., Emmanuel, B., & Idanyingi, R. B. (2020). Inflation, dividend policy, and investment decisions of quoted firms: Panel data estimates from Nigeria. RSU Journal of Strategic and Internet Business, 5(1), 972–993. [Google Scholar] [Crossref]

23. World Bank. (2024). World development report 2024: Investing for sustainable growth. World Bank. [Google Scholar] [Crossref]

• Impact of Foreign Direct Investment in India
• Issues Involved in Digitalisation Special Reference to Indian Tourism Growth
• Relationship Marketing and Customer Loyalty in the Fast-Moving Consumer Goods (FMCG) Industry in Nairobi County
• Financial Literacy or Financial Inclusion? Which is Which, What is What—To Achieve Uganda’s 10-Fold Economic Growth By 2040
• Harnessing Natural Gas for Economic Transformation: Overcoming the Regulatory and Infrastructural Bottlenecks in Nigeria