Page 1 of 11
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 9
Setember 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 16
The Determinants and Management of Investment at the
Macro-Economic Level in Nigeria.
Oluwafemi Elijah OJO
Department of Business Administration and Management Rufus Giwa Polytechnic Owo, Ondo
State, Nigeria
E-mail: adebayoga2016@gmail.com
Abstract
The main thrust of this paper is to determine
the factors that are responsible for the level
of investment in Nigeria between 1992 and
2014. The gross fixed capital formation
(GFCF) was the proxy for investment and
was the dependent variable. The
independent variables were inflation rate
(INF), interest rate (INT), exchange rate
(EXR), foreign direct investment (FDI), and
real gross domestic product (RGDP).
Findings revealed that FDI and EXR were
the determinants of investment during the
period of study. The two variables
significantly affect investment level at 5%
level of significance. It has been
recommended that policy makers in the
country should therefore focus policy
attention on foreign direct investment and
exchange rate in Nigeria.
Keywords: Determinants of Investment,
Macro Economic Level, Gross Fixed Capital
Formation
Introduction
The developed economics of today
are nest on the pursuance of synergic and
dynamic investment policies. One major
economic difference between the first world
economy and the third world economy is the
level of investment. Investment is an
increase in real capital in an economy such
as an increase in factories and machinery, or
in its human capital; that is the stalled with
educated labour force. Such capital goods
are used to create other goods and services.
If the first world countries underscore the
importance of investment, it is expected to
be on non-optional priority rating in the
third world countries. Gross investment is
the national gross fixed capital formation
(GFCF). Like domestic investment, foreign
direct investment (FDI) stimulates growth,
creates job, fosters competition, and
facilitate the creation and exchange of goods
services and innovative techniques. This
would had encourage Nigeria to embarked
upon several trade liberalisation policies so
Page 2 of 11
Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 9
Setember 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 17
as to free FDI flows into the country.
(Adegbite and Owuallah, 2007). According
to Udeaja et a (2008), FDI appears to be the
most crucial. Investment can be used as a
tool for transmitting technical change and
product innovative. Apart from producing
needs for mans survival. They also added
that investment responds to changes in
government policies not only in designing
long term strategies but also in
implementing short term stabilization
programs.
The level of investment in Nigeria is
low. A review of the structure of federal
government finances share total expenditure
to be excess of total federally collected
revenue since 1995 and 1996 that spoiled
the deficit design (CBN, statistical bulletin,
2011: 97-99). Total investment in 1990
(2%); 1992 (10%) ; 1995 (7.5%); 1999
(7%); 2004 (7.4%) 2007 (9.2%); and 2011
(11%). An average of these sport checks is
7.67 percent since 1990[ CBN 2011]:
A close examination of the
immediate past five years average (129-131)
revealed that there was a gradual increase in
investment level relatives to GDP for 2009-
2011; with the five years average of 10.44
percent of GDP. Given the importance of
investment at the nation’s economy, it is
germane to investigate the factors
responsible for low investment growth in
Nigeria. These factors can be analysed as
quantitative and qualitative. part of the
qualitative factors are the political instability
in the 90s. At the substances of democratic
rule in 1999, there was a little breath
between 2001 and 2008. Terrorism is
another agent of political instability. No
natural investors would ever make the
mistake of investing in a country whose
security is in the mud. Ethnics ‘militants
especially in the Niger delta has long been
serious threats to prospecting oil in the area.
It should be noted that most regional ethnic
movement in Nigeria are the consequences
of vulgarization of democracy insincerity
and corruption. Investment growth needs
good climates.
Quantitative factors are: tax (CIT)
and the petroleum profit tax (PPT) on the
level of investment. Tax policy affects both
domestic investment and foreign direct
investment (FDI) inflows. Among the tax- incentives that incite investment growth are
value-added tax, company income tax,
property tax, royalty payments, import
tariffs, tax holidays grants, capital allowance
acceleration, import tariffs, enhanced
deduction special investment allowance etc.
there could be a selective therapy between
domestic investment and FDI on the tax
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Journal for Studies in Management and Planning
Available at
http://edupediapublications.org/journals/index.php/JSMaP/
e-ISSN: 2395-0463
Volume 02 Issue 9
Setember 2016
Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 18
incentives classified FDI inflow into the
country in 2011 was about $8.8B, but has
fallen to about $7B m 2012 (Duru, 2013).
The main effect of this Boko Haram on the
economy will be a sort of spill over to two
or more years even after the death of Boko
Haram, investment response to changes in
political climate may take years. Another
reason advanced for the drop was the weak
global economies among the micro- economic lieutenants that affect investment
level are inflation, interest rate and exchange
rate volatilities. The incidence of adverse
global economy is a legitimate concern on
investment as exchange rate is partially tied
to its apron.
Unemployment in the country can be
tracked to low level of investment. Many
other economic problems are the sons and
grandsons of low investment level. The
objective of this paper is to investigate those
variables that may affect investment growth
in Nigeria. Specifically, the major variables
are inflation, interest rate, exchange rate,
foreign direct investment and the GDP.
1.2 Objectives of the Study
The broad objective of the study is to assess
the performance of gross fixed capita
formation (GFCF) in Nigeria while the
specific objective is:
To determine how inflation rate, interest
rate, exchange, foreign direct investment
inflows and real GDP has been influencing
the level of investment (GFCF) in Nigeria.
2.0 Review of Related Literature
2.1 Definition of Investment
Investment involves purchasing of
capital goods which are used to create other
goods and services. This is different from
savings, which is the creation of financial
obligations. For an individual investment
might include the purchase of financial
assets, such as stocks, bands, mutual find, or
life insurance. Investment can also include
the purchase of durable goods such as
housing or a car. For an economist,
investment refers to the increase in real
capital in an economy, such as an increase in
a factories and machinery, or in its human
capital, that is, a staled and educated labor
force. Investment can be by domestic
investors.
Another aspect of investment is an
inflow from another country to Nigeria. This
is referred to as foreign direct investment
(FDI). According to Piana (2005), it consists
of acquisition of, or creation of assets. This
is the investment by the first world corporate
(FWC) (transnational corporations) in the
third world countries (TWC) can purchase
existing asset in the target country
