Macroeconomic Determinants of Economic Growth in Nigeria: A Co-integration Approach

Abstract

The study examines the macroeconomics determinants of economic growth in Nigeria measured by real gross domestic product (RGDP). We used time series data obtained from CBN for a period of 26 years that is 1986 to 2012. Augmented Dickey-Fuller (ADF) test was used for the unit root test and Johansen’s co-integration test was also conducted to establish short and long run relationships between economic growth and its macroeconomics determinants. The result shows six co-integrating equations which establish the existence of long run relationship among the variables. Ordinary Least Square statistical technique was used to assess the degree of influence the variables have on each other. The results show that gross fixed capital formation, foreign direct investment and total government expenditure are the main determinants of Nigeria economic output under a stable inflationary rate. The study recommended that there is need for government to consciously develop the business environment by provision of necessary infrastructure, which will lower the cost of doing business in Nigeria. There is also the need for the government to retain tight monetary and fiscal policies in order to fight inflation in the Nigerian economy, since inflation have negative influence on investment and Nigeria economic growth and finally, There is needs to put stringent policy in place to minimised strike in Nigeria labour sector in order to enhance their performance to the nation economy.