Investment is the process of adding to capital (Arene and Okpukpara, 2006). Lack of capital has been implicated as the major sustenance of the vicious circle of poverty. This is due to its negative effect on production capacity. In developing countries, national income is low; hence savings and investment are low. Low investment translates to low capital stock, low productivity and low output as well as low income. In terms of agricultural productivity, Arene and Okpukpara (2006) hold that massive application of capital to land in form of land reclamation and critical productive inputs improve its productivity. In Keynesian terminology, real investment refers to addition to capital (as a factor of production) which leads to increase in the levels of production and income (Jhingan, 2003). Thus, real investment includes new plant and equipment, construction of public works like dams, road, building, net foreign investment, inventories, and stocks and shares in new companies.
According to Jhingan (2003), investment could be induced or autonomous. Induced investment is profit or income motivated. On the other hand, autonomous investment is independent of the level of income. In reality, there are three major determinants of investment. These are the cost of capital asset, expected rate of return and the market rate of interest. These factors are embedded in Keynes' concept of marginal efficiency of capital (MEC). MEC expresses the highest rate of return from an additional unit of a capital asset or fund over its cost or opportunity cost.