Investigating the Direction of Relationship Between Economic Indicators and Economic Growth in Nigeria

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• September 5, 2023
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Oluka, Kingsley Ugochukwu¹, Ugwu, Felix Ikechukwu, PhD², & Chime, Angela Isioma^3
123Department of Business Administration, Enugu state University of Science and Technology, Nigeria

AbstractThe study is on investigating the direction of relationship between economic indicators and economic growth in Nigeria. The specific objectives are as follows: to examine the relationship between inflation rate and real gross domestic product in Nigeria, to ascertain the relationship between exchange rate and real gross domestic product in Nigeria and to assess the relationship between interest rate and real gross domestic product in Nigeria. The study used secondary sources of data from the Central Bank of Nigeria Statistical Bulletin. An ex-post facto research design was also adopted. The study employed multiple regressions of the Ordinary Least Square (OLS) method. The results revealed that the inflation rate had a positive and non-significant relationship with real gross domestic product in Nigeria (t-statistics is 0.698872, while the probability value is 0.4916). The exchange rate had a positive and significant relationship with real gross domestic product in Nigeria (t-statistics is 3.330717, while the probability value is 0.002916). The interest rate had a negative and significant relationship with real gross domestic product in Nigeria (t-statistics is -2.110512, while the probability value is 0.0459). From the findings, the following recommendations were made: A major policy implication of these results is that concerted effort should be made by policymakers to increase the level of output in Nigeria by improving productivity/supply in order to reduce the prices of goods and services (inflation) and boost the growth of the economy. Inflation can only be reduced to the barest minimum by increasing the output level (GDP). The interest rate should be considered, and for there to be meaningful economic activity, the interest rate on investible funds must be brought low, either by monetary or fiscal policy measures, to encourage output and increase income. This is to enable an appreciable level of investment to exist within the economy and, in turn, stimulate economic growth. There should be a change in business operations and they must become formal without becoming too bureaucratic and the change must be properly managed. If successful, the exports are to perform and grow. The Federal government and its agencies should also formulate policies that will encourage exporters to source funds from the capital market, as well as improving business conditions and the business environment. Keywords: Macroeconomic Indicators; Economic Growth; Inflation Rate; Exchange Rate; Interest Rate Citation Oluka, K. U., Ugwu, F. I. & Chime, A. I. (2023).  Investigating the Direction of Relationship Between Economic Indicators and Economic Growth in Nigeria. International Journal of Economics and Public Policy, 7(1), 17-31 https://doi.org/10.5281/zenodo.8318354