DETERMINANTS OF ECONOMIC GROWTH IN NIGERIA

Abstract

This study applies the ARDL bounds testing approach of Pesaran, Shin, and Smith (2001) to analyse the determinants of Nigeria’s economic growth from 1990 to 2023. Using real GDP per capita as the dependent variable, the model incorporates total trade, foreign direct investment (net inflows), gross fixed capital formation, and government recurrent spending on education. Results show that trade and education spending exert negative short-run effects, while FDI has a negative short-run but significant positive long-run impact. Gross fixed capital formation has a positive and significant effect on growth in the short run, but not in the long run. The error correction term confirms a stable long-run equilibrium, with 62% adjustment annually. The model explains 91.5% of growth variations, indicating strong explanatory power. Based on the findings, this study recommends, among others, that the Nigerian government should implement targeted incentives such as tax holidays, streamlined regulatory approvals, and sector-specific infrastructure investments in non-oil industries to attract FDI, while enhancing domestic absorptive capacity through skills training to mitigate short-run negative effects and maximize technology spillovers for sustained per capita growth.