Abstract

The study is an attempt to investigate the effect of Grossfixed capital formation on economic growth in Nigeria, using annual time series data rangingfrom 1981-2017, the study estimated a dynamic multiple regression model with gross domestic product as the dependent variable while gross fixed capital formation, inflation, savings and lagged values of GDP are independent variables . A granger causality test was carried out to ascertain the causal relationship ifany between gross domestic product and the selected explanatory variables. The study established that in the period under review, grossfixed capitalformation has a positive impact on economic growth in Nigeria. The impact is also statistically significant at lag one .The study also established that there is a bidirectional causality runningfrom grossfixed capital formation to gross domestic product in Nigeria as well asfrom gross domestic product to grossfixed capital formation in Nigeria. The study concluded with the importance offixed capital formation in promoting economic growth cannot be overemphasized. Keynesian macroeconomics predicts a multiplier effect between investment infixed capital and output growth. The study is therefore an attempt to investigate the effect of Grossfixed capital formation on economic growth in Nigeria .After reviewing theoretical and empirical evidence both domestic andforeign the studyfound a unanimous agreement amongst economist that grossfixed capital formation has an impact on economic growth although the magnitude ofthis impact has been a source of debate amongst researchers andpolicy makersforsometimes. Using annual time series data rangingfrom 1981- 2018, the study estimated a dynamic multiple regression model with gross domestic product as the dependent variable while grossfixed capitalformation, inflation, savings and lagged values ofGDP as independent variables . The study also estimated a granger causality test to ascertain the causal relationship if any between gross domestic product and the selected explanatory variables.. The study recommends the encouragement of private sector activities through increases in the ease of doing business, low taxes on private sector investors, subsidies on imported fixed capital, increase availability ofloans to the private sector. This will go a long way in encouraging heavy investment infixed capital by the private sector and in return increase economic in the country.