Many developing countries experienced a downturn in economic growth in the early
1980s. In Africa, the growth rate of income per capita fell significantly following
persistent decline in domestic investment. For Sierra Leone, private investment as a
share of GDP declined steadily from 6.9% in 1986 to around 3.1% in 1988. This trend
further deteriorated to a record low of about 2.4% in 1993. This study principally aims
at evaluating the macroeconomic determinants of private investment in Sierra Leone
using times series data for the period 1966 to 2008. In order to account for factors that
best capture the behaviour of private investment decisions in Sierra Leone, a more
flexible version of the accelerator principle was adopted in specifying an investment
equation for the study. To empirically determine the relationships between private sector
investment and some key macroeconomic variables, the study employs Ordinary Least
Square estimation following an examination of the time series properties of the data set
using unit root tests. The results from the unit root tests for stationarity show that all
the variables are stationary with breaks, justifying the use of an Ordinary Least Square
estimation approach. The empirical findings from this study show that, while private
sector investment is positively driven by real GDP, public sector investment, and credit
availability to the private sector, it is, however, negatively driven by the real interest
rate, inflation, and political instability, characterized by a decade-long civil conflict.
