Financial Panic, Insecurity and Private Investment in Nigeria

Atseye, Fidelis Anake 1 , Akeh, Monica Ukongim 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 financial panic and insecurity on investment
in Nigeria. To achieve this, inflation rate and exchange rate were used as measures of the financial
vulnerability which defined financial panic, interest rate was utilized as the price of borrowed
funds associated with any investments and terrorism index was proxied for financial panic
associated for insecurity in Nigeria. The research employed the trend analysis and OLS regression
technique in analysing the historical time series data for the period 1999 -2019. The Augmented
Dickey Fuller (ADF), and Johansen’s co-integration tests were conducted to verify the existence
of unit root, co-integration and long run relationships. The ADF results revealed that the data
used under surveyed converged after random walk at first and second differences thereby
removing the presence of spuriousness in the data and providing integrity to the model. The result
of the Johansen’s co-integration test indicated that, in the long run, the dependent variables can
be efficiently anticipated using the independent variables. The OLS regression results showed that
inflation rates, interest rates and terrorism index negatively affected private investments in Nigeria
while exchange rate revealed a positive impact on private investment. All independent variables
conformed with the apriori expectations. Conclusively, insecurity, macroeconomic instability and
financial system fragility collectively affect private investment in Nigeria. The study recommended,
among other things, a deliberate and frontal action by the Nigerian government to tackle rising
banditry, terrorism and all forms of criminality with a view to promoting peace, safety, private
investment and economic prosperity for Nigeria as well as West African sub-region.

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