Time-Series Analysis of Sectoral Composition, Financial Conditions, and Economic Growth in Nigeria

Authors

Yakubu Joel Cherima, Rejoice Kaka Hassan, Onigah Peter Oko, Ugo Uwadiako Enebeli, Ebelechukwu Lawrence Enebeli, Yonwul Jacqueline Dakyen, Fiyidi Mikailu, Kebiru Umoru, Zubairul Islam

Abstract

This study investigates the sectoral and macroeconomic determinants of GDP growth in Nigeria using annual time-series data from 1990 to 2023 obtained from the World Bank World Development Indicators. Sectoral effects are examined through an ordinary least squares (OLS) framework linking GDP growth to value-added shares of agriculture, industry, and services, while macroeconomic dynamics are assessed using an Autoregressive Distributed Lag (ARDL) model and an Error Correction Model (ECM) incorporating domestic credit to the private sector and inflation. Descriptive analysis reveals substantial growth volatility, with GDP growth averaging 4.25% (standard deviation = 3.91%) and ranging from −2.04% to 15.33%. OLS results indicate that agriculture value added is positively and statistically significantly associated with GDP growth (β = 0.44, p = 0.015), whereas industry value added is negative but insignificant (β = −0.11, p = 0.37). The sectoral model explains approximately 20% of annual growth variation (R² = 0.20), reflecting the limited capacity of contemporaneous sectoral composition to capture short-run growth fluctuations. Augmented Dickey Fuller tests show mixed integration orders among variables, justifying the use of the ARDL approach. The bounds test indicates possible cointegration, and ECM results confirm long-run stability through a negative and significant error-correction term (λ = −0.525, p = 0.004), implying that nearly 52% of short-run disequilibrium is corrected within one year. Short-run effects of changes in domestic credit and inflation are statistically insignificant, highlighting weak immediate macroeconomic transmission to growth. The findings demonstrate a clear temporal differentiation in Nigeria’s growth process: agriculture remains the dominant short-run growth driver, while industry, services, and financial development influence growth primarily through long-run structural and adjustment mechanisms. The study provides empirically grounded insights for balancing short-term growth stabilization with long-term structural transformation.

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