An Econometric Analysis of the Relationship between Macroeconomic Factors and Economic Growth in Nigeria

Abstract

This paper aims to find the macroeconomic constraints of Nigeria through GDP (Gross Domestic Product) measurement. From 1991 to 2017, time series data has been collected from CBN and World Bank, on which Ordinary Least Square technique was employed to assess the impact of the macroeconomic factors on economic growth. Causal relationship has been measured through Granger Causality Test. Association between economic growth and the macroeconomic variable has been noticed. Negative and significant relationship between unemployment and economic growth has also been observed. Inflation rate has been seen to create a negative and -significant impact on economic growth. It also showed that while inflation rate has an impact on economic growth, economic growth does not cause changes in inflation rate. It also revealed that while unemployment does not cause changes in economic growth, economic growth has an impact on unemployment. The study recommended that the Nigerian government should reduce taxes to boost aggregate demand to stimulate economic growth and consequently to curb unemployment. It was also recommended that fiscal and monetary policies be adopted to reduce inflation in a bid to promote economic growth in the nation. Finally, there is also the need for the Nigerian government to stimulate exportation to enable the appreciation of the Naira currency. This will result in the growth of the Nigerian economy.