A disaggregated ARDL analysis of capital formation on economic growth in Nigeria: Evidence from the endogenous growth model

Abstract

This study has investigated the disaggregated impact of capital formation on economic growth in Nigeria over the periods of 1990 to 2021 sourcing its data from the 2022 Central Bank of Nigeria Statistical Bulletin and 2023 World Development Indicators. Specifically, it examined how, and to what extent, gross capital formation, government recurrent expenditures on education and health, foreign direct investment, gross domestic savings, and domestic credit to private sectors have impacted economic growth in Nigeria. It used the Phillip-Perron, Kwiatkowski-Phillips-Schmidt-Shin, and the augmented Dickey-Fuller unit root test to ascertain the order of integration among the series. Consequently, through the Auto-Regressive Distributed Lag bound testing technique, the study found that in the long run, the disaggregated physical and human capital formation had a significant positive influence on economic growth. In the short-run, however, government recurrent expenditures on education, foreign direct investment, and domestic credit to private sectors had a significant impact on economic growth while other variables did not significantly cause economic growth. Thus, in conclusion, the study suggests policy recommendations to boost human capital through education, health, and credit access, while addressing high interest rates.

Keywords

• ardl
• capital formation
• endogenous growth model