Effects of Selected Macroeconomic Variables on Private Investment in Nigeria

The study examined the long-term relationship between government spending and private investment in Nigeria using quarterly data from 2000Q1 to 2023Q4. Controlling for inflation, financial market growth, and monetary policy, the Fully Modified Ordinary Least Squares (FMOLS) method was applied following Johansen cointegration tests. Results indicated that shortterm private investment depended largely on past values, while long-term investment was significantly influenced by government spending and inflation. Market depth and interest rates showed minimal effects. The study confirmed a positive long-run linkage consistent with public sector-led investment growth literature in developing economies. The Vector Error Correction Model (VECM) also demonstrated that deviations from equilibrium adjust over time. By integrating multiple macroeconomic factors and distinguishing short- and long-term effects, the research provided nuanced insights into fiscal policy’s role in Nigeria. The findings suggest that prioritising productive government expenditure and improving fiscal transparency can effectively stimulate private investment.