An Assessment of Factors Influencing Investment Decision in Nigeria: a Case Study of the Nigerian Manufacturing Sector

Nigeria’s manufacturing sector plays a pivotal role in driving economic growth, job creation, and industrial transformation. Despite its potential, the sector continues to underperform due to a combination of macroeconomic instability, institutional inefficiencies, and firm-level challenges. This study critically examines the influence of macroeconomic variables (GDP, inflation, interest rates, exchange rates), microeconomic factors (manufacturing capacity utilization, manufacturing output and manufacturing value added), and institutional conditions (regulatory quality, corruption, trade openness) on investment decisions within Nigeria’s manufacturing industry, a focus area that remains underexplored in empirical literature. The research adopts a quantitative methodology, utilizing secondary time-series data from 1994 to 2023. Data were collected from reliable sources including the Central Bank of Nigeria, World Bank, IMF, and national statistical agencies. Econometric analysis was conducted using ARDL models to assess the statistical relationships between the dependent variable (investment) and a set of explanatory macroeconomic, microeconomic, and institutional variables, ECM, and Longrun and Bound Test were also conducted. Diagnostic tests were employed which are Serial corrrelation and Granger Causality Test to ensure model validity, address Autocorrelation, and confirm the robustness of the results. Key findings reveal that high inflation, interest rates, and exchange rate volatility significantly deter investment, while stable GDP growth fosters a more favorable investment environment. Micro-level analysis shows that firms with strong capacity utilization, and effective management are more likely to attract investment. Institutional weaknesses, particularly policy inconsistency and corruption, further erode investor confidence. The study concludes that investment in Nigeria’s manufacturing sector can be enhanced through targeted macroeconomic stabilization, institutional reforms, and microeconomic support for firms. Practical policy implications include lowering borrowing costs, improving governance, and expanding access to infrastructure and innovation incentives.