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Research Article Open access CC BY 4.0

Gross Capital Formation, Infrastructure and Economic Development in Nigeria

Adegboyega Samson Opadeji, Oladimeji Abeeb Olaniyi, Adewale Mathew Adekanmbi, Joseph Oluremi Olubitan

Asian Journal of Economics, Business and Accounting · pp. 275–285 · Published 4 Nov 2023

10.9734/ajeba/2023/v23i221152

Abstract

In Nigeria, the extent to which the decline in capital formation as well as the dismal and disrepair state of most infrastructural facilities impair the growth potentials of the nation are relatively unknown. Given this, this study utilized the Johansen co-integration technique and the Vector Error Correction Model (VECM) to examine the impact of gross capital formation and infrastructure on economic development in Nigeria from 1991 to 2021. The findings of the co-integration analysis revealed the existence of a long-run relationship among the variables while the Vector Error Correction Model (VECM) indicated that gross capital formation did not exert a statistically significant effect on economic development in Nigeria within the study period. However, it was observed that infrastructure had a significant positive effect on the development of the economy. Based on the findings, the study recommended a collaborative effort between the government and private sectors to establish a conducive environment that promotes capital investments within the country. Also, capital formation should be efficiently utilized with a sizable amount accorded to infrastructural development which in turn translates to economic development.

Gross Capital Formation Economic Development Infrastructure Nigeria VECM

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