Factors Influencing Economic Growth in Nigeria: A Growth Accounting Framework Analysis

Abstract

This research examines the drivers of economic expansion in Nigeria from 1960 to 2017, employing the growth accounting methodology based on the classical neoclassical production function. The focus is on assessing the contributions of capital, labor, and total factor productivity (TFP) to Nigeria's economic growth. Furthermore, to determine the interrelations among capital, labor, TFP, and economic growth, correlation coefficients among these variables were calculated. The correlation analysis indicated positive associations between the growths of capital, labor, TFP, and economic growth. Moreover, findings from the growth accounting analysis highlighted capital as the primary contributor to economic growth in Nigeria throughout 1961-2017. In specific sub-periods, capital remained the dominant growth driver in the initial phase (1961-1980), while labor took precedence in the 1981-2000 period, with capital following and TFP growth showing a decline, as evidenced by its negative contribution. Nonetheless, TFP emerged as the critical factor driving economic growth from 2001-2017. Consequently, the study suggests the implementation, maintenance, and enhancement of policies that promote physical capital, human capital, and technological advancements through both domestic and foreign investments, recognizing their essential roles in fostering economic growth and development.