Impact of Macroeconomic Uncertainty on Economic Growth in Nigeria: 1985-2018

Macroeconomic uncertainty pertains to the inability to predict the future performance of the overall economy. It can be caused by volatile interest rates, unstable unemployment, and unpredictable interest rates. This situation can destabilize an economy which can lead to recession. The paper analyses the effects of macroeconomic variables on the economic performance in Nigeria. Utilizing the Ordinary Least Squares (OLS) method for econometric estimation, the paper considered yearly time series data of 5 variables; Unemployment rate, stocks traded, inflation, interest rates, and Gross Domestic Product, and examined their influence on economic growth. The findings revealed that when the four other variables are regressed against GDP, there is a negative correlation thus discouraging investment and making policy implementation difficult. However, there is a positive, though not statistically significant relationship between between GDP and interest rates when regressed solely against interest rates and stocks traded. In conclusion, the study shows that because of unpredictable economic conditions, policymakers may struggle to effectively implement growth-stimulating measures, potentially leading to economic downturns, reduced productivity, and hindered long-term growth prospects. This paper recommends that the importance of implementing strong and consistent economic policies to reduce uncertainty and promote stable and sustainable economic growth. Keywords: Stock market, uncertainty, Inflation, OLS, and Economic Growth