What role does private sector development play in Nigeria’s economic growth?

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.
AcknowledgmentsWe 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.