Exploring the Link between Domestic Private Business Investment and Economic Development in Nigeria: A Sectoral Analysis

This study investigated the impact of domestic private business investment (PDI) on economic development in Nigeria, with a specific focus on sectoral analysis. The aim of the study was to examine how private investments, particularly gross fixed capital formation (GCF), influence economic growth as measured by real GDP (RGDP). The study adopted an ex post facto research design, utilizing annual time series data from 1995 to 2024, sourced from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and other relevant government publications. The methodology employed includes trend analysis, descriptive statistics, and the vector autoregressive (VAR) model for estimation, alongside diagnostic tests such as the Augmented Dickey-Fuller (ADF) test for unit roots and the ARDL Bounds Test for cointegration. The theoretical framework integrates the Neoclassical Theory of Investment/Growth, Keynesian Theory of Investment, Endogenous Growth Theory, and Financial Liberalization Theory. The findings revealed that private domestic investment positively influences GDP, aligning with the theoretical perspectives on capital accumulation, aggregate demand, and financial liberalization. Additionally, a bi-directional relationship between PDI and GDP was observed, highlighting a mutually reinforcing cycle of growth. The study concluded that private investment is a significant driver of economic development in Nigeria and recommended that the Nigerian government implement policies to foster investment in key sectors such as agriculture, manufacturing, and infrastructure, while ensuring financial stability and regulatory improvements to attract sustained private investment.