The Nexus between Privatization and Macro-Economic Environment: Evidence from Nigeria

Aims: This study examines the growth link between privatization and macro-economic aggregates in Nigeria. The growth effects between privatization proceed (privp), government expenditure (govtexp), per capita expenditure (pexp), unemployment rate (unemr) and inflation (infl) are studied. Scope of the study: The study covers.

Methodology: We employ structural equation models: Granger Causality Wald Test and Impulse Response Function. The Ordinary Least Square (OLS) method of estimation is employed using time series from World Bank Development Indicators (WBI) and Central Bank of Nigeria bulletin 2012.

Result: From the result, impulses from govtexp to a unit structural shock exert a positive growth on privp and other macro-economic variables. When govtexp produces impulses, the response of privp to exhr, and privp to gfcap are very low and insignificant. When privp produces impulse, the response of pexp to privp are emitted at first period but after this period, positive shocks are recorded in a fluctuating manner. The IRF result also shows that responses and shocks of exhr to impulse produced by privp are also insignificant. This is the case with privp and gfcap, privp and gdp as wall as privp and pexp. The causality test on the other hand shows that privp leads growth in all the variables except infl with a feedback relationship from unemr and gdp.

Conclusion: This implies, privatization cause’s growth in all macro-economic variables except inflation. The IRF results generally support this but reveal that the growth link between privatization and macro-economic aggregates is weak and insignificant. Privatization policy should be strengthened in a more transparent, profitable and responsive manner.

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