EFFECT OF SELECTED MACROECONOMIC VARIABLES ON THE ECONOMIC GROWTH OF NIGERIA (1980-2024)
Abstract
ABSTRACT
This study investigates the effect of macroeconomic variables on the economic growth of Nigeria covering the period 1980–2024. Unlike many previous works that emphasized conventional indicators alone, this research integrates interest rate, exchange rate, inflation rate, money supply, and industrial output into the analysis, with real GDP growth (GDPgr) serving as the dependent variable. Secondary data were sourced from the Central Bank of Nigeria Statistical Bulletins, the National Bureau of Statistics, and the World Bank Development Indicators. The study employed Augmented Dickey-Fuller (ADF) tests to examine the stationary properties of the data, the Autoregressive Distributed Lag (ARDL) and diagnostic tests to validate model reliability. The descriptive statistics revealed that the variables display reasonable consistency, though exchange rate exhibited the highest volatility. The ADF results confirmed a mixture of I(0) and I(1) processes, justifying the ARDL framework. Granger causality tests showed a mix of uni-directional and bi-directional relationships between macroeconomic variables and GDP growth, underscoring the interdependence of Nigeria’s economic environment. Notably, GDP growth exhibited significant causal links with interest rate, exchange rate, inflation rate, money supply, and industrial output. The OLS regression results revealed that only industrial output exerted a statistically significant positive effect on GDP growth at the 5% level, while interest rate, exchange rate, inflation rate, and money supply were statistically insignificant within the model. However, the signs of their coefficients suggest that exchange rate and inflation rate negatively influence growth, whereas interest rate and money supply exert a positive but weak effect. The model explained about 65% of the variation in GDP growth, while diagnostic tests confirmed that the regression model was free from issues of serial correlation, heteroskedasticity, and non-normality of residuals. The study concludes that macroeconomic stability alone is insufficient for growth unless it translates into improved industrial output and productivity. It therefore recommends that policymakers should prioritize industrial development, ensure exchange rate stability, moderate inflationary pressures, and sustain credible monetary policies that encourage productive investment. By highlighting the empirical importance of industrial output in driving Nigeria’s economic growth, the study contributes to the macroeconomic literature and provides valuable insights for policymakers and researchers seeking evidence-based strategies for sustainable development.
Keywords: Macroeconomics variables, Economic Growth, Industrial output, ARDL Model
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