Macroeconomic Determinants of Economic Recession in Nigeria

By: Chukwudi Emmanuel Edeh, Charity Nonyelum Edeh, Joel Michael Ibrahim

Pages: 167–186, Volume: 2, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 9/1/2025, 2025

ISSN (Electronic): 2536-6742

DOI: 10.48028/iiprds/aefunaijefds.v2.i2.09

Macroeconomic Determinants of Economic Recession in Nigeria

Abstract:

The objective of the study is to examine the macroeconomic determinants of economic recessions in Nigeria. Time series variables for GDP growth rate, interest rate, inEation, recurrent spending, FDI, external debt, and oil rent for the period 1981-2023 were examined. The Autoregressive Distributed Lag (ARDL) model was used for data analysis. Results show that current inEation considerably slows growth, FDI has a delayed negative effect in the short term, and interest rates, external debt, and oil rent have negligible effects. Growth is greatly slowed by recurring expenses. Long-term growth is still hampered by inEation and recurring spending, FDI and interest rates are still ineffective, external debt has a slight positive impact, and oil revenue is still negligible. Based on the findings from the study, it is suggested that Nigeria adopt tighter and well-coordinated monetary and fiscal policies to reduce inEation, which consistently slows economic growth in both the short and long term. Foreign direct investment should be redirected toward productive sectors through targeted incentives and regulatory reforms, while recurrent expenditure must be reduced and reprioritized in favor of capital spending that drives inclusive growth. In addition, Nigeria should use external borrowing strictly for high-impact investments, reduce reliance on oil revenues by diversifying exports, and strengthen the monetary transmission mechanism to make interest rate policy more effective.

Keywords: Economic recession, Macroeconomic determinants, Oil price shocks, Monetary policy, Nigeria