THE IMPACT OF URBANIZATION ON ECONOMIC GROWTH IN NIGERIA
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Abstract
This study examines the impact of urbanization on economic growth in Nigeria over the period 1981 to 2024 using the Autoregressive Distributed Lag (ARDL) modeling approach. Gross domestic product (GDP) was used as the dependent variable, while urbanization (URB), population (POP), foreign direct investment (FDI), and inflation (INF) served as explanatory variables. The study employed unit root tests to determine the stationarity of the variables, followed by ARDL bounds testing to investigate the existence of a long-run co-integration relationship among the variables.
Short-run ARDL estimates showed that past values of GDP, urbanization, population, and FDI significantly affect current economic growth, while inflation has a marginally negative impact. Long-run estimates revealed that urbanization and FDI positively influence GDP, whereas population growth and inflation negatively affect economic performance. The error correction term was negative and statistically significant, demonstrating the model’s ability to correct deviations from long-run equilibrium.
Diagnostic tests confirmed the robustness of the model, with no evidence of heteroskedasticity or serial correlation, and the R-squared and F-statistic values indicated strong explanatory power. Based on these findings, the study concludes that
urbanization and stable FDI inflows are critical drivers of economic growth, while population growth and inflation require careful management. Policy recommendations include planned urban development, promotion of sustainable foreign investment, population management, and macroeconomic stability to ensure that urbanization contributes positively to Nigeria’s economic development.
Short-run ARDL estimates showed that past values of GDP, urbanization, population, and FDI significantly affect current economic growth, while inflation has a marginally negative impact. Long-run estimates revealed that urbanization and FDI positively influence GDP, whereas population growth and inflation negatively affect economic performance. The error correction term was negative and statistically significant, demonstrating the model’s ability to correct deviations from long-run equilibrium.
Diagnostic tests confirmed the robustness of the model, with no evidence of heteroskedasticity or serial correlation, and the R-squared and F-statistic values indicated strong explanatory power. Based on these findings, the study concludes that
urbanization and stable FDI inflows are critical drivers of economic growth, while population growth and inflation require careful management. Policy recommendations include planned urban development, promotion of sustainable foreign investment, population management, and macroeconomic stability to ensure that urbanization contributes positively to Nigeria’s economic development.
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