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Public – Private Investment Nexus in Developing Economies: Does Financial Sector Development Matter for Nigeria?

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  • Adegboye, Abiodun Adewale
  • Alimi, R. Santos

Abstract

Much of the social and economic infrastructural deficits in Africa have been attributed to inadequate investment levels in many countries of Africa. Although Nigeria is not lacking in foreign private investments, the present level of total investment is adjudged sub-optimal, and the public sector is perceived to be large, inefficient and also dominant. The question arising is whether the composition of investment matters for the overall investment behaviour in Nigeria. The main objectives of the paper are to investigate the complementarity or substitutability of public and private investment, as well as examine whether financial sector development drive private investment in Nigeria. The paper employed annual data covering the period of 1981 to 2015 and ARDL estimation. The bounds test results revealed that there exists a long-run relationship among the variables. The study found that public investment crowds out private investment in Nigeria. In other words, the complementarity effect between private investment and public investment is not justified in the study; rather, there exists a substitution effect between private and public investments in Nigeria. More so, the result suggested that the effect of financial development on private – public investment nexus is positive and significant (P

Suggested Citation

  • Adegboye, Abiodun Adewale & Alimi, R. Santos, 2017. "Public – Private Investment Nexus in Developing Economies: Does Financial Sector Development Matter for Nigeria?," MPRA Paper 80908, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80908
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    1. Eslon Ngeendepi & Andrew Phiri, 2021. "Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region?," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 19(1 (Spring), pages 3-25.

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    More about this item

    Keywords

    Nigeria; private investment; public investment; financial development; ARDL;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H00 - Public Economics - - General - - - General

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