Macroeconomic Uncertainty and Private Investment in Nigeria


The paper investigates the determinants of aggregate private investment and determines the long-run relationship between macroeconomic uncertainty and aggregate private investment decisions in Nigeria between 1970 and 2006. Cointegration and error correction modeling techniques is adopted in the estimation of aggregate private investment models. The results show that private investment in Nigeria is significantly and positively affected by income, public investment and credit to private sector while it is negatively affected by real interest rates and the size of debt. The paper further reveals that inflation rate, exchange rate and fiscal deficit uncertainties are most detrimental to private investment recovery in Nigeria. The paper concludes that the key to private investment recovery and economic growth in Nigeria is in reducing the overall level of macroeconomic uncertainty.

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