Private Consumption and Investment as Drivers of Economic Activity in Nigeria (1986–2025)

This study examines the determinants of private consumption and investment as drivers of economic activity in Nigeria over the period 1986–2025. Using annual time series data and deploying Ordinary Least Squares (OLS), Fully Modified OLS (FMOLS), Dynamic OLS (DOLS), and Autoregressive Distributed Lag (ARDL) models, the study investigates how gross fixed capital formation, foreign direct investment, infrastructure development, inflation, exchange rate volatility, trade openness, technology, government expenditure, institutional quality, control of corruption, political stability, ease of doing business, sectoral composition, natural resource rents, financial development, labour force participation, R&D expenditure, and ICT adoption jointly shape consumption and investment outcomes. The ARDL bounds test confirms cointegration among the variables. Empirical results consistently reveal that gross fixed capital formation (β = 0.84), infrastructure index (β = 1.38), financial development (β = 0.58), and ICT adoption (β = 0.67) are the most potent drivers of private consumption activity. Inflation (β = −0.56) and exchange rate volatility (β = −0.48) impose significant contractionary effects. Institutional quality, political stability, and control of corruption yield positive and statistically significant coefficients, affirming that governance quality is central to sustained economic growth in Nigeria. Notably, natural resource rents and R&D expenditure do not attain statistical significance, raising critical concerns about Nigeria's resource management and innovation capacity. The study contributes to the scarce multi-variable literature on Nigerian macroeconomics by adopting a holistic framework that bridges demand-side and supply-side determinants. Actionable policy recommendations are advanced to help Nigeria diversify its economy, deepen financial markets, and improve institutional governance.