Physical Infrastructure and Economic Performance in Nigeria: A Ridge Regression Analysis
Abstract
In Nigeria, how far the deplorable state of most infrastructural facilities and the state of disrepair affect the growth potentials of the nation is relatively unknown. In view of this, this study investigates the role of infrastructure on economic performance in Nigeria using annual time series data for the period 1990-2019. The study employed Principal Component Analysis to develop an infrastructure index based on six major infrastructure indicators (electricity, telecommunication, rail density, air transport, energy use, and internet penetration) and also utilized the ridge regression estimation technique due to the presence of high multicollinearity among our variables. The study found that infrastructure positively and significantly enhanced economic performance within the period. The study, therefore, recommends the need for the Nigerian government and its agencies to monitor infrastructure spending closely and firmly adhere to due process following the enabling fiscal policy.
References
Adelowokan, O., Ajayi, F., Maku, O., & Adesanya, K. (2019). Infrastructural development, poverty reduction and economic growth in Nigeria. EuroEconomia 1(38), 121-136
Adesoye, B. (2014). Infrastructural financing in Nigeria: Growth implications. Journal of Economics and Sustainable Development, 5(5) 77-91.
Agenor, P. & Moreno-Dodson, B. (2006). Public infrastructure and growth: New channels and policy implications. The World Bank Working Paper, Washington, DC, USA.
Agenor, P., Nabli, M., & Yousef, T. (2005). Public infrastructure and private investment in the Middle East and North Africa, World Bank Working Paper 3661.
Agenor, P. R. (2010). A theory of infrastructure-led development. Journal of Economic Dynamics and Control, 34(5), 932-950.
Albala-Bertrand, J., & Mamatzakis, E. (2004). The impact of public infrastructure on the productivity of the Chilean economy. Rev. Dev. Econ. 8, 266–278.
Almeida, J. & Mendonca, H. (2019). The impact of infrastructure and taxation on economic growth; new empirical assessment. Journal of Economic Studies, 46(5) 1065-1082
Aschauer, D. (1989). Does public capital crowd out private capital? Journal of Monetary Economics, 24, 171–188.
Aschauer, D. (1989). Is Public Expenditure Productive? Journal of Monetary Economics. 23(3), 177-200.
Aworinde, O. & Akintoye, I. (2019). Institutions, infrastructure and economic growth in Nigeria. ECONOMICA. 15(3) 205-216.
Ayeni, O. & Afolabi, O. (2020) Tax Revenue, Infrastructural Development and Economic Growth In Nigeria. Online at https://mpra.ub.uni-muenchen.de/99464/ MPRA Paper No. 99464
Barro, R. (1990). Government spending in a simple model of endogenous growth. Journal of Political Economy, 98(5)
Biehl, D. (1991). The Role of Infrastructure in Regional Development. in Infrastructure and Regional Development R.W.Vickerman. London.
Calderon, C. (2009). Infrastructure and growth in Africa, Policy Research Working Paper 4914, World Bank, Washington, D.C.
Canning, D. & Fay, M. (1993). The effect of infrastructure networks on economic growth. Department of Economics, Columbia University, New York.
Canning, D., & Pedroni, P. (2004). The Effect of Infrastructure on Long-Run Economic Growth. Harvard University, 1-30.
Demurger, S. (2001). Infrastructure development and economic growth: An explanation for regional disparities in China. Journal of Comp. Econ. 29, 95–117.
Dissou, Y., & Didic, S. (2011). Public infrastructure and economic growth. Working paper, Department of Economics, University of Ottawa
Ekeocha, D., Ogbuabor, E., & Orji, A. (2021). Public infrastructural development and economic performance in Africa: a new evidence from panel data analysis. Economic Change and Restructuring, 1 - 20.
Ekpung, E. (2014). Public infrastructure spending and economic growth in Nigeria: An Error Correction Mechanism (ECM) Approach. Journal of Social Economics Research 1(7), 129-140
Fedderke, J., & Bogetic, Z. (2006). Infrastructure and growth in South Africa: Direct and indirect productivity impacts of infrastructure measures. World Bank Working Paper 465
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (international edition). New York: McGraw-Hills Inc.
Hansen, N. (1965). The structure and determinants of local public investment expenditures. Review of economics and statistics 2, 150-162.
Hoerl, A., & Kennard, R. (1970). Ridge regression: Biased estimation for nonorthogonal problems. Technometrics, 12(1), 55-67.
Holtz-Eakin, D. (1993) Solow and the States: capital accumulation, productivity, and economic growth, National Tax Journal, 46, (4), 425-39.
Hulten, C. & Schwab, R. (1991). Is there too little public capital? Infrastructure and economic growth. Paper presented at the Conference on Infrastructure Needs and Policy Options for the 1990s, American Enterprise Institute, Washington, D.C
Javid, M. (2019). Public and private infrastructure investment and economic growth in Pakistan: An aggregated and disaggregated analysis. Mpdi Journal of Sustainability. 11, 3359
Khan, H., Khan, U., Jiang, L., & Khan, M. (2020). Impact of infrastructure on economic growth in South Asia: Evidence from pooled mean group estimation. The Electricity Journal, 33(5), 106735.
Nadiri, M., & Mamuneas, T. (1996). Contribution of highway capital to industry and national productivity growth; Federal Highway Administration. Washington, DC, USA.
Nedozi, F., Obasanmi, J. & Ighata, J. (2014). Infrastructural development and economic growth in Nigeria: Using simultaneous equation. Journal of Economics 5(3) 325-332
Ogbaro, E. & Omotoso, D. (2017). The Impact of Infrastructure Development on Economic Growth in Nigeria. Nigerian Journal of Management Sciences 6(1), 270-275.
Onakoya, A., Salisu, A., & Oseni, I. (2012). Infrastructure and economic growth in Nigeria: A multivariate approach. Research Journal of Business Management and Accounting, 1(3), 30-39.
Otto, G., & Voss, G. (1994). Public capital and private sector productivity. Economic Research. 70, 121–132.
Owolabi-Merus, O. (2015). Infrastructure development and economic growth nexus in Nigeria. International Journal of Academic Research in Business and Social Sciences, 5(1), 376
Romer, P. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.
Roy, B. C., Sarkar, S., Mandal, N. R., & Pandey, S. (2014). Impact of infrastructure availability on level of industrial development in Jharkhand, India: a district level analysis. International Journal of Technological Learning, Innovation and Development, 7(2), 93-123.
Shi, Y., Guo, S. & Sun, Y. (2017) The role of infrastructure in China’s regional economic growth. Journal of Asian Economics, 49, 26-41.
Straub, S. (2008). Infrastructure and growth in developing countries: Recent advances and research challenges. The World Bank Policy Research Working Paper. 4460, Washington, DC, USA.
Sturm, J., & Jacobs, J. (1995). Productivity impacts of infrastructure investment in the Netherlands. University of Groningen. Research Institute SOM 26(2), 1853-1913
Tatom, I. (1993), The spurious effect of public capital formation on private sector productivity. Policy Studies Journal, 21(2) 391-395.
Tella, S., Amaghionyeodiwe, L. & Adesoye, B. (2007). Telecommunications infrastructure and economic growth: evidence from Nigeria. A paper submitted for the UN-IDEP and AFEA joint conference on “Sector-led Growth in Africa and Implications for Development” Dakar, Senegal.
Torrisi, G. (2009). Public infrastructure; definition, classification and measurement issues. Munich Personal RePEc Archive. 12990
Wen, L. & Shao, H. (2019) Analysis of influencing factors of the carbon dioxide emissions in China’s commercial department based on the STIRPAT model and ridge regression. Environmental Science and Pollution Research.
World Bank (2008). “World Bank Group, sustainable infrastructure action plans FY 2009-2011”. The World Bank, Washington DC.
World Bank, (2020). World development indicators. World Bank Publications. Retrieved from http:/data,worldbank.org.com.
Yoantika, A. & Susiswo (2021). Comparing the Principal Regression Analysis Method with Ridge Regression Analysis in Overcoming Multicollinearity on Human Development Index (HDI) Data in Regency/City of East Java in 2018. Journal of Physics, Conference Series 1872 012024.
Zeng, K., Li, S. & Li, Q. (2013). The impact of economic growth and tax reform on tax revenue and structure: Evidence from China experience. Modern Economy, 4, 839-843.
Zheng, J and Rakovski, C. (2021). On the Application of Principal Component Analysis to Classification Problems. Data Science Journal, 20: 26, 1-6.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Oladimeji Olaniyi, Sheriffdeen Adewale Tella, Abayomi Toyin Onanuga
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.
