Abstract:

The study investigated the effect of domestic investment on industrial sector in Nigeria. The main objective of this study is to examine the extent to which domestic investment has contributed to the growth of the industrial output in Nigeria from the period of 1985 till 2016. Secondary data was collected from the CBN statistical bulletin and national bureau of Statistics. Data of this study was conducted using Phillip Perron (PP) test at levels and at first difference. Variables such as gross fixed capital formation (GFCF), Lending rate (LR), gross domestic savings,(GDS) and distribution of loans and advances to the industrial sector(IDCL). Hypothesis was formulated and tested using augmented Toda Yamamoto estimate. Evidence from the result shows  that there exist an inverse relationship between GFCF and IGDP, LR estimates shows a direct positive relationship with IGDP but not significant in the long run, detailed analysis of GDS reveals a significant direct relationship with IGDP at 1% level significance and finally, IDCL indicate a significant direct relationship between IGDP. The study further carried out some diagnostic test such as co integration test with bound testing approach, Autogressive Toda Yamamoto ( ATY) Joint Statistic  with the modified wald test. Results from the co integration test, shows F- statistics value of 4.067808 which was found to be greater than the pesarean upper bound value at 5% level of significance, proves the  existence of significant long run relationship between IGDP growth model and the exogenous variables. Also, the significance of the F and chi square statistics from the Wald restriction test suggest the existence of co integration and plausible long run relationship among the variables included in the model. The study therefore recommends that government should therefore assist DMBs to develop long term savings for the real sector fund. Also, interest rate on deposit should be increase to improve the saving culture of citizens.