EFFECT OF SELECTED MACROECONOMIC VARIABLES ON ECONOMIC GROWTH IN NIGERIA
Keywords:
Economic Growth, Financial Stability, Gross Capital, Formation, Inflation Rate Interest RateAbstract
Nigeria's economic growth has remained persistently weak despite policy reforms, raising concerns about the financial system's capacity to support sustainable development. This study examined the effect of financial stability indicators on economic growth in Nigeria using annual time-series data spanning 1986–2024. The data were sourced from the Statistical Bulletin of the Central Bank of Nigeria, covering a sample size of 39 observations. Real Gross Domestic Product (RGDP) was used as a proxy for economic growth, while inflation rate, interest rate, and gross capital formation were employed as financial stability indicators. The study adopted the Autoregressive Distributed Lag (ARDL) bounds testing approach to examine both long-run and short-run relationships. The results confirm the existence of a long-run equilibrium relationship among the variables. Inflation and interest rate exert negative and statistically significant effects on economic growth, indicating that macroeconomic instability and high borrowing costs constrain productive activities. Gross capital formation shows a positive and significant impact, underscoring the importance of investment in driving output expansion. The findings highlight the need for coordinated monetary and fiscal policies aimed at price stability, balanced interest rate management, and sustained investment promotion to achieve stable and sustainable economic growth in Nigeria.
References
Acharya, V. V., & Yorulmazer, T. (2021). Systemic risk in the financial system: A review. Journal of Financial Stability, 56, 100934.
Adaramola, A. O., & Dada, S. O. (2020). Inflation and economic growth in Nigeria: An empirical analysis. Journal of Economics and Public Finance, 6(2), 45–62.
Adediran, O., & Olufemi, A. (2025). Financial system stability and economic growth in Nigeria. Journal of Financial Stability, 45, 102367.
Adegbite, S. (2022). Financial system development and economic growth in Nigeria. Journal of Financial Studies, 30(3), 221–237.
Ademola, A., & Eke, A. (2021). Institutional quality and economic growth in Nigeria. African Development Review, 33(4), 512–529.
Ademola, O., Adediran, O., & Usman, T. (2023). Interest rate and real GDP growth in Nigeria: Evidence from ARDL modelling. Quarterly Journal of Economics and Policy Analysis, 7(3), 56–75.
Adenikinju, A., & Ajayi, K. (2025). Financial system stability and economic growth in Nigeria. Nigerian Economic Review, 18(1), 45–68.
Agbaje, K. (2023). Macroeconomic instability and growth in Nigeria. Economic Analysis and Policy, 43(2), 89–104.
Ahmed, I., & Olowookere, O. (2021). Asset quality and Nigerian bank performance. Journal of Banking Regulation, 24(2), 145–160.
Alsamara, M., Mrabet, Z., Jarallah, S., & Barkat, K. (2019). The switching impact of financial stability and economic growth in Qatar. The Quarterly Review of Economics and Finance, 73, 205–216.
Altman, E. (2021). Fifty-year retrospective on credit risk models. Journal of Financial Stability, 59, 100945.
Amali, et al. (2022). Banking system stability and economic growth in Nigeria. American International Journal of Economics and Finance Research, 5(1).
Anagun, A., & Sokunbi, O. (2024). Disaggregated capital formation and economic growth in Nigeria (1990–2021). Journal of Development Finance and Economic Modelling, 16(2), 98–118.
Central Bank of Nigeria (CBN). (2020). Financial Stability Report. CBN.
Central Bank of Nigeria (CBN). (2024). Annual Report and Financial Statements. CBN.
CEIC. (2024). Nigeria gross fixed capital formation: 2010–2024. CEIC Data.
Chidi, U., & Bright, E. (2025). Inflation-unemployment dynamics and economic growth in Nigeria: An ECM approach. African Journal of Applied Econometrics, 13(2), 102–119.
Eze, A., et al. (2021). Cross-country comparison of banking sector stability. African Development Review, 33(3), 345–362.
Gbarawae, D., & Tonye, W. (2023). Interest rate, exchange rate and economic growth in Nigeria: An ARDL approach. Review of African Macroeconomic Studies, 11(2), 34–53.
Goldsmith, R. W. (1969). Financial structure and development. Yale University Press.
Ifeacho, C., Okoye, V., & Ugwueze, A. (2025). Dynamic relationship between inflation and economic growth in Nigeria (1981–2021). Nigerian Journal of Monetary and Financial Economics, 14(1), 55–73.
McKinnon, R. I. (1973). Money and capital in economic development. Brookings Institution.
National Bureau of Statistics (NBS). (2023). Nigerian gross domestic product report: Q4 2023. Abuja: NBS.
National Bureau of Statistics (NBS). (2024). Gross domestic product report: Q1 2024. Abuja: NBS.
National Bureau of Statistics (NBS). (2025). Inflation statistics: 1996–2025. Abuja: NBS.
Olabisi, A., & Akeju, J. (2025). Migrant remittances, capital formation and economic growth in Nigeria (1990–2023): A multivariate analysis. Journal of Economic Policy and Research, 18(1), 73–94.
Olasehinde-Williams, G., Adeniyi, O., & Oladimeji, M. (2024). Interest rate volatility and economic growth in Nigeria: A QARDL approach. Journal of Financial Stability and Development, 12(1), 44–61.
Oluwaseun, F., & Kolawole, A. (2021). Financial stability and SDGs. Journal of Development Economics, 22(1), 78–101.
Opadeji, S., Iyanda, O., & Hassan, K. (2023). Gross capital formation, infrastructure and economic development in Nigeria (1991–2021). African Review of Economic Development, 9(3), 122–140.
Schumpeter, J. A. (1912). The theory of economic development. Harvard University Press.
World Bank. (2016). Global financial development report: Financial stability and development. World Bank Publications.
Downloads
Published
Issue
Section
License
Copyright (c) 2026 This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License, which permits unrestricted use, distribution, adaptation, and reproduction in any medium, provided that the original work is properly cited.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Authors are permitted to post their work online in institutional/disciplinary repositories or on their own websites. Pre-print versions posted online should include a citation and link to the final published version in Journal of Librarianship and Scholarly Communication as soon as the issue is available; post-print versions (including the final publisher's PDF) should include a citation and link to the journal's website.
