The lack of private investment in productive capital is a serious problem in many developing countries, especially in sub-Saharan Africa in general and Nigeria in particular. In the last three decades, the Nigerian Government has spent a huge amount of money on infrastructure, but this has had little impact on efficiency. This study uses microeconomic evidence to show the effects of poor infrastructure services on private investment in Nigeria. Using data from 70 manufacturing firms, the study finds that infrastructure deficiencies, proxied by an unreliable and inadequate power supply, significantly curtails productive investment by firms. As a result of poor public infrastructure, many firms have invested in complementary capital rather than in productive capital. The government therefore needs to channel more resources towards the efficient delivery of public infrastructure services so as to boost private investment in productive capital.
Key words: Infrastructure deficiencies, productive investment, complementary capital, manufacturing firms.
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