Effect of Private Sector Credit and Investment on Economic Growth in Nigeria

The study analysed the effect of private sector credit and investment on economic growth in Nigeria (1988-2018). Secondary data used were sourced from CBN bulletin. A linear relationship is established between economic growth proxied by GDP the dependent variable and the independent variables of the study which include foreign portfolio investment, foreign direct investment, Nigerian lending interest rate and private sector credit. Data generated were analysed with econometric statistical package E-View 10. Test statistics used were Augmented Dickey Fuller (ADF) unit root test, and Autoregressive Distributed Lag (ARDL) model. ADF unit root test showed that variables in the model were integrated at order one, 1(1) and 1(0). Findings from the long and short run regression estimate of the ARDL model showed that probability of T- statistics of the Private Sector credit is significant while that of Foreign Direct Investment, Foreign Private Investment and Nigerian Lending Interest rate were insignificant. This led to the conclusion that Private Sector Credit does significantly increases GDP, while Foreign Direct Investment, Foreign Portfolio Investment and Nigerian Lending Interest Rate are not. The bound test for Co-integration showed that the relationship is sustained in the long run. The Error Correction Coefficient (ECM) CointEq(-1), is -0.47048, it showed that the model corrects its previous periods disequilibrium at a speed of 47% estimated annually. The study therefore recommend that the Nigerian government needs to formulate policies that; would encourage private sector investment, enhance saving, stabilize interest rate to improve the confidence of the foreign investors in the economy, as this might lead to sustainable economic growth in Nigeria among others.