What role does private sector development play in Nigeria’s economic growth?
-
DOIhttp://dx.doi.org/10.21511/ppm.20(4).2022.25
-
Article InfoVolume 20 2022, Issue #4, pp. 332-343
- 1188 Views
-
262 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Many studies have concluded that private sector development encourages economic growth due to many public enterprises’ poor performance and technological deficiencies. However, other studies have noted that private sector development would lead to the misuse of monopoly power. Since the advocacy is from two different perspectives, there is a need to investigate further the impact of private sector development on the country’s economy. The bounds cointegration test examined the long-term relationship between privatization and GDP growth. The long- and short-term connections between private sector development and GDP growth were studied using an Auto-Regressive Distributed Lag (ARDL) model. As a result, economic growth was found to be highly influenced by gross capital formation and market capitalization of domestic listed enterprises as a share of GDP, according to the ARDL estimates in the short term. In addition, the periods after privatization increase growth by about 0.23% in the short run and by 3.87% in the long run, at a 1% significance level. At a 1% significance level, gross capital formation and market capitalization of domestic listed enterprises as a share of GDP positively affected economic growth in the long term. This led to the conclusion that private sector development positively influences Nigerian economic growth in both the long- and short-term. This study recommends policy changes such as raising domestic investment and promoting privatization, capital market development, and financial institution development. This will stimulate private sector development and have a favorable impact on economic growth.
Acknowledgments
We appreciate the feedback from our unnamed reviewers, the Journal’s editor, and the authors whose works were referenced. In addition, we acknowledge the support of our colleagues from the Economics Department, Afe Babalola University Ado-Ekiti, for their helpful feedback to improve this study.
- Keywords
-
JEL Classification (Paper profile tab)L32, L33, P42, O40
-
References51
-
Tables4
-
Figures0
-
- Table 1. Summary statistics of the model variable
- Table 2. Results of ADF unit root test
- Table 3. Bounds cointegration test result
- Table 4. ARDL short- and long-run results
-
- Abdullahi, H. (2014). Public Private Partnership and Port Efficiency: The Nigerian Experience. 12th Intermodal Africa Conference & Exhibition. Lagos, Nigeria.
- Abdullahi, Y. Z., Abdullahi, H., & Mohammed, Y. (2012). Privatization and firm performance: An empirical study of selected privatized firms in Nigeria. Mediterranean Journal of Social Sciences, 3(11), 207.
- Acemoglu, D., Johnson, S., & Robinson, J. A. (2004). Institutions as a Fundamental Cause of Long-Run Growth (NBER Working Paper No. 10481).
- Afolabi, J. A. (2004). Challenges of Private Sector – Led Growth in Nigeria. Proceedings of the Thirteenth Annual Conference of the Regional Research Units. Abuja.
- African development bank (AfDB). (2011). Chapter 1 – The role of the private sector in Africa’s economic development (Report).
- Al-Otaibi, M. M. (2006). Economic study of relationship between privatization and economic growth from a sample of developing countries. Colorado State University.
- Amoo, G., Eboreime, M. I., Adamu, Y., & Belonwu, M. C. (2017). The impact of private sector credit on economic growth in Nigeria. CBN Journal of Applied Statistics (JAS), 8(2), 1.
- Andabai, P. W. (2014). Private sector development and economic growth in Nigeria. International Journal of Advanced Research in Statistics, Management and Finance, 2(1), 15-25.
- Azubuike, A. (2020). IFC Supports Nigeria’s Private Sector Development Amidst Fragility & the COVID-19 Pandemic. IFC.
- Barnett, S. A. (2000). Evidence on the fiscal and macroeconomic impact of privatization (Working Paper WP/00/130). International Monetary Fund.
- Besley, T., & Ghatak, M. (2010). Property rights and economic development. In Handbook of development economics, 5 (pp. 4525-4595).
- Boubakri, N., Cosset, J. C., & Smaoui, H. (2009). Credible Privatization and Market sentiment: Evidence from Emerging Bond Markets. Journal of International Business Studies, 40, 840-858.
- Cheuvart, C. (2017). Private sector: mismatching development with economic growth? Briefing, 84.
- Cook, P., & Uchida, Y. (2003). Privatization and economic growth in developing countries. The Journal of Development Studies, 39(6), 121-154.
- Davis, P. (2016). Private sector development in countries progressing from poverty (Final Report). ECORYS.
- Estrin, S., & Pelletier, A. (2018). Privatization in developing countries: what are the lessons of recent experience? The World Bank Research Observer, 33(1), 65-102.
- Filipovic, A. (2006). Impact of privatization on economic growth. Undergraduate Economic Review, 2(1), 7.
- Gberevbie, D. S., Oni, S., Oyeyemi, A., & Abasilim, U. D. (2015). Privatization of public enterprises: which way Nigeria? Ecoforum, 4(1), 33-45.
- Godwin, D. T. O., & Dagogo, D. (2011). Deregulation of the Nigerian economy: The theoretical milieu. 1st International Technology, Education and Environment Conference (pp. 123-128).
- Haque, M. I. (2020). The growth of the private sector and financial development in Saudi Arabia. Economies, 8(2), 39.
- Hood, R. (2007). Measuring performance in private sector development. Asian Development Bank.
- House of Commons & Allison, D. (2012). Driving inclusive economic growth: The role of the private sector in international development (Report of the Standing Committee on Foreign Affairs and International Development). Canada: Parliament, House of Commons.
- Ifionu, E. B., & Ogbuagu, A. R. (2013). Privatization and economic performance: Evidence from Nigeria (1990–2010). African Research Review, 7(2), 16-43.
- Iheonu, C. O., Asongu, S. A., Odo, K. O., & Ojiem, P. K. (2020). Financial sector development and Investment in selected countries of the Economic Community of West African States: empirical evidence using heterogeneous panel data method. Financial Innovation, 6(1), 29.
- Ilegbinosa, I. A., Micheal, A., & Watson, S. I. (2015). Domestic investment and economic growth in Nigeria from 1970–2013: An econometric analysis. Canadian Social Science, 11(6), 70-79.
- International Finance Cooperation (IFC). (2011). International Finance Institutions and development through the Private Sector. Washington.
- Iwara E. I. (2007). Industrial Relations in Complex Organization in Nigeria. Ibadan, Nigeria: College Press.
- Kalu, C. U., & Onyinye, M. O. (2015). Domestic private investment and economic growth in Nigeria: Issues and further consideration. International Journal of Academic Research in Business and Social Sciences, 5(2), 302-313.
- Kandenge, F. T. (2010). Public and private investment and economic growth in Namibia (1970–2005). Botswana Journal of Economics, 7(11), 2-15.
- Kolawole, B. O., & Omobitan, O. A. (2014). Determinants of private sector performance in Nigeria. Developing Country Studies, 4(6), 41-49.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The quality of government. Journal of Law, Economics, and Organization, 15(1), 222-279.
- McArthur, J. W., & Sachs, J. D. (2001). Institutions and geography: comment on Acemoglu, Johnson and Robinson (2000) (NBER Working Paper No. W8114). Cambridge MA: National Bureau of Economic Research.
- Muhamad, G. M., Heshmati, A., & Khayyat, N. T. (2020). The Dynamics of Private Sector Development in Natural Resource Dependent Countries. Global Economic Review, 49(4), 396-421.
- Nwachukwu, J. N., & Eme, O. I. (2015). Changing Patterns of Privatization: A Comparative Study of University and Industrial Sub–Sectors of Nigeria’s Economy. Mediterranean Journal of Social Sciences, 6(3), 75-75.
- Nwakoby, C., & Bernard, A. (2016). Effect of private sector investment on economic growth in Nigeria. NG-Journal of Social Development, 5(4), 150-168.
- Nwoye, M. I. (2011). Privatization of public Enterprises in Nigeria: The views and counterviews. Journal for Political theory and research on Globalization, Development and Gender Issues, 2(4), 234-251.
- Obadan, M. I. (2010). Privatization of public enterprises in Nigeria: issues and conditions for success in the second round. Ibadan, Nigeria: National Centre for Economic Management and Administration.
- OECD. (2009). Privatization in the 21st century: Recent experiences of OECD countries. Paris, France: Organisation for Economic Co-operation and Development.
- Ogohi, D. C. (2014). Analysis of the performance of public enterprises in Nigeria. European Journal of Business and Management, 6(25), 24-32.
- Okoi, I., Ubi, I., Iheanacho, M., Emori, E., & Sunday, E. (2022). Strategic entrepreneurship practices and performance of small and medium-sized enterprises in Nigeria. Problems and Perspectives in Management, 20(1), 108-116.
- Olowofeso, E. O., Adeleke, A. O., & Udoji, A. O. (2015). Impact of private sector credit on economic growth in Nigeria. CBN Journal of Applied Statistics, 6(2), 81-101.
- Osemeke, M. (2011). Problems and prospects of private sector organizations in Nigeria. Current Perspective to Economics and Management, 6(4), 122-139.
- Oyediran, L. S., Ijaiya, M. A., & Lawal, A. A. (2017). Effect of Privatization on Economic Growth of Nigeria: 1980–2014 in Retrospect. Research Journal of Finance and Accounting, 8(17), 15-21.
- Rodrik, D. (2007). What Produces Economic Success? In R. Ffrench-Davis & J. L. Machinea (Eds.), Economic Growth with Equity (pp. 27-43). London: Palgrave Macmillan.
- Spicer, M., & Bousquet, F. (2019, September 24). The private sector: An engine for growth and stability in fragile countries. World Bank Blogs.
- Stephen, C. C., Omokhudu, O. W., & Anthony, K. A. (2016). The impact of privatization and commercialization in Nigeria. International Research Journal of Management, IT and Social Sciences, 3(9), 107-119.
- Udoka, C. O., & Anyingang, R. A. (2012). The effect of privatization on economic growth of Nigeria: 1979-2007 in Retrospect. International Journal of Economic Development Research and Investment, 3(2), 25-35.
- Warren, M. (1998). Privatization, factor productivity and Economic Growth in less developed Countries. Unpublished Doctoral dissertation. London School of Economics.
- Williams, G., Duncan, A., Landell-Mills, P., & Unsworth, S. (2009). Politics and growth: An analytical framework. Development Policy Review, 27(1), 5-31.
- World Bank. (2005). Economic Growth in the 1990s: Learning from a Decade of Reform. Washington, DC: World Bank.
- World Bank. (2022). World Development Indicators (WDI).