1.1 RESEARCH BACKGROUND
Following the slump in the oil prices and insecurity challenges that have plagued Nigeria, research interests in searching for alternative means of driving sustainable long term growth have been rekindled. In the development economics literature, a plethora of factors have been identified and explored as the drivers of economic growth.
Investment has been identified as a key determinant of economic growth in any nation according to many macroeconomic literature and empirical evidences. It has been revealed to be one of the sustainable factors of major long-term economic growth many empirical researches. Investment is divided into foreign and domestic investment. The foreign component is divided into Greenfield or foreign direct investment and portfolio investment. The domestic component is divided into public investment and private investment. Domestic investment can be harnessed to drive growth especially in developing nations. This is because it increases employment opportunities, attracts foreign investment and increases the new technology in the country.
Nigeria is reputed to be buoyantly blessed with enormous mineral and human resources. Nevertheless, the country has been known to be high risk market for investment (Osmond, 2015).
According to World Bank (2009), the level of domestic saving and investment is inadequate to fuel the growth needed to raise living standards and generate sufficient productive employment. Investment plays a crucial role in models of economic growth. It is an essential component of aggregate demand and fluctuations in investment have considerable effect on economic activity and long-term economic growth. A few basic trends have emerged over the past few years as regards the aggregate domestic investment income. The strong positive correlation which exists between saving, investment and growth is well established in the literature. The dismal growth record in most African countries, relative to other regions of the world has been of concern to economists. This is because the growth rate registered in most African countries is often not commensurate with the level of investment (Toochukwu, 2012; Agu et al, 2013). In Nigeria for instance, the economy witnessed tremendous growth in the 1970s and early 1980s as a result of the oil boom. Following the oil boom, there was investment boom especially in the public sector. However, with the collapse of the oil market in the 1980s, investment fell, there resulting in a fall in economic growth.
According to the World Bank (2012), a close examination of the aggregate domestic investment income shows that the collapse of investment which began in the early 1970s was broad-based. With aggregate income levels between N128.6 to N297.8 million in the early 1970s, it fell to as low as -N404.1 and -N334.7 million in the early 1980. Although in 1987 the levels of investment in Nigeria rose to as high as N2452.8 million. This encouraging signs increase consistently, and persisted till 2004, recording its highest income, 258,388.6 million in 2003. But from 2004, domestic investment in Nigeria has witnessed a continuous decline which has fallen below any other level of loss ever recorded in this sector since independence. With as low as N1921.2 million in 2005 to as drastically low as -N114484.4 million in the year 2008, the levels of domestic investment in the Nigeria economy has fallen with over 145 percent below its 2004 position.
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