OPTIMALITY LEVEL OF MACROECONOMIC INDICATORS AND ECONOMIC GROWTH IN NIGERIA

Authors: Odor, Thomas Orukwu, PhD & Joseph M. IBBIH

ABSTRACT

This study empirically examined the relationship between optimality of macroeconomic indicators and economic growth in Nigeria. The data used for the analysis was secondary annual time series data covering a period of 1980 to 2024 and were collected from the Central Bank of Nigeria (CBN) annual statistical bulletin and National Bureau of Statistics (NBS). The study employed econometric techniques of Autoregressive Distributed Lag (ARDL) model. The result of the ARDL revealed that inflation has a positive (99,919.158) and insignificant (0.6970) relationship with economic growth in Nigeria, while interest rate has a positive (199,893.2) and significant (0.0113) influence on economic growth in the long run in Nigeria. The result further showed that exchange rate has a negative (-34,967.28) and insignificant (0.0906) impact on economic growth in Nigeria. The study also showed that unemployment rate is positively (686,032.6) and significantly (0.0357) impact economic growth in the long run but in the short run is positive (88,739.13) and statistically insignificant (0.4020) in Nigeria. The study further revealed that poverty rate has a positive (95,468.23) and statistically significant (0.0404) long run impact on economic growth in Nigeria but negatively (-9,134.843) insignificant (0.6937) impact in the short-run in Nigeria. More so the study found that consumption negatively (- , 909.545) and insignificant (0.1577) impact economic growth in the long run, but positively (29.53654) and insignificant (0.9648) impact on economic growth in the short in Nigeria, while Investment revealed a positive (81.12635) and insignificant (0.4658) impact on economic growth in the long run but has positive (501.3648) and statistically significant (0.0384) impact on RGDP in the short run in Nigeria. The result on government expenditure revealed a negative (-869.8982) and insignificant (0.2589) impact on economic growth in Nigeria in the long run but in the short the result has a positive (428.7287) and insignificant (0.1424) impact on RGDP in Nigeria. Lastly, balance of payment has a positive (2.807797) statistically significant (0.0144) impact on economic growth in the long run but in the short run BOP is also positive (0.518763) and statistically insignificant (0.1615) impact on RGDP in Nigeria. The result of ECM CointEq(-1)* (-0.042961) with p-value (0.0000) is less than 1 implying that the model slowly adjusts to a stable long-run relationship or resume to equilibrium after a short-run fluctuation. The study concludes that macroeconomic indicators are not in their optimal level, they have mixed impact on economic growth in Nigeria, specifically, and unemployment, interest rate; poverty rate and balance of payment have significant impact on economic growth in Nigeria; whereas inflation, exchange rate, consumption, investment and government expenditure are not statistically significant. The findings reinforce the argument that macroeconomic indicators are not in their optimal level in Nigeria as clearly shows that inflation is not at optimal level due to persistent high inflation rates in Nigeria history. Unemployment rate is not in its optimal level as high unemployment rates persist in Nigeria. Exchange rate too is not at optimal level base on volatile exchange rate, impacting investment, interest rate also not optimal with high interest rates, limiting access to credit and poverty rate improving, but still high though with significant positive impact on growth. The study therefore concludes that macroeconomic indicators are not in their optimal level due to: structural issues (weak institutions, infrastructure constraint), policy challenges (ineffective policy implementation, corruption), and external factors (global economic trends, oil price volatility). Nigeria’s macroeconomic indicators require sustained policy attention to achieve optimal levels and promote sustainable growth. The study therefore recommends that Nigeria economic growth needs targeted policies to address these macroeconomic indicators.

Keywords: Macroeconomic indicators, economic growth and optimality level

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