Economic Recovery, Price of Funds and Domestic Investment: Evidence from Nigeria

Atseye, Fidelis Anake 1 , Obim, Ndifon Edim 2 , Aliyu, Rilwanu Saad 3
Department of Banking and Finance
Faculty of Management Sciences
University of Calabar, Nigeria
Corresponding Author: anakefidel@yahoo.co.uk and anakefidel@unical.edu.ng

The paper empirically examined the causal effects of economic recovery and price of funds on
domestic investment in Nigeria for the period spanning 1986-2020. The paper employed historical
research design with annual time series data extracted from the Central Bank of Nigeria (CBN)
and World Bank Indicator. Data collated were analysed with the aid of the multiple regression
technique after being subjected to preliminary tests such as the Augmented Dickey-Fuller (ADF)
and Johansen Co- integration tests to address the issue of unit root and long run relationship
respectively. The ADF results showed that all data were stationary at first difference, while
Johansen Co-integration test revealed the presence of a long run equilibrium relationship among
the co-integrating variables. Arising from the Johansen Co-integration test, Error Correction
Mechanism (ECM) was employed and results revealed that economic recovery as represented by
real GDP and price of funds in the financial market indicated by real interest rate exerted positive
impact on domestic investment in Nigeria within the period investigated. However, inflation rate
negatively affected domestic investment in Nigeria. The paper recommended among other things,
a macroeconomic policy encompassing monetary and fiscal framework that would reduce the cost
of funds, boost domestic investment and facilitate economic recovery and sustain growth.

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