AN EXAMINATION OF THE IMPACT OF MACROECONOMIC POLICIES ON DOMESTIC INVESTMENT IN NIGERIA
DOI:
https://doi.org/10.60787/AASD-v2i1-40Keywords:
Domestic investment, Macroeconomic policy, Ordinary Least Square, NigeriaAbstract
This paper examined the impact of macroeconomic policies variables on gross domestic investment in Nigeria for the period (1981-2021), using the econometric techniques of Ordinary Least Square and error correction model for analysis. The result revealed that national income, government capital expenditure and external debt had positive and significant impact on domestic investment. Also, interest rate and market size had positive but insignificant effect on domestic investment. Both exchange rate and inflation rate had negative but insignificant relationship with domestic investment. This study therefore, concludes that macroeconomic policies affect domestic investment in Nigeria, and the drivers of domestic investment in Nigeria in relation to macroeconomic policies as identified in this study are national income, government expenditure especially capital expenditure, interest rate and external debts while volatile exchange rate and inflation rate exerted negative effect. Based on the findings, it is recommended that government policy should be directed toward expanding the productive base of the economy in order to reduce unemployment, increase output and income in the economy, and consequently increase national income to boost investment. Government should ensure that capital
expenditure forms the bulk of total government expenditure and should be prudently employed in the provision of economic and social overhead capital (infrastructure) which is known for complementing private investment. To minimize uncertainty, fiscal policy in the country should be complemented with effective monetary policy in order to handle inflation rate and interest rateissues, and exchange rate management should be intentionally geared toward ensuring relative stability of exchange rate.
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