Foreign Capital Inflows and Economic Growth Nexus in Nigeria
Year: 2025
Type: article
Abstract: This study examined the relationship between foreign capital inflows and economic growth in Nigeria for the period 1981 to 2023. Specifically, the study investigated the extent to which foreign capital flows through foreign direct investment, foreign portfolio investment, external debt stock and foreign aids influences gross domestic product proxy for economic growth in Nigeria, using secondary data from Central Bank of Nigeria statistical bulletin and World Bank global data base. Descriptive statistics, Unit root test, Johanson co-integration test and Error correction model were employed to analyze the data. The Johanson co-integration test revealed the presence of long run relationship among variables. The short run dynamics test showed that, previous year foreign direct investment exhibits strong but negative influence on gross domestic product for the period, foreign portfolio investment is positive but weak while external debt stock and foreign aids exhibits weak negative impacts on gross domestic products. The study thus, concluded that foreign direct investment is a significant predictor of economic growth in Nigeria and recommends that, the managers of the Nigerian economy should consider restructuring economic policies on foreign direct investment with the aim of increasing investment inflows that is capable of improving the value of domestic production, leading to high productive capacity. Efforts should be made to deliberately channel borrowed funds to target productive economic activities that are capable of increasing the productive capacity of the economy. Also, pro-active financial control measures should be set in place to stop diversion of funds from productive sectors to non-productive sectors of the economy.
Author: Kenule–Eguru, Leture Blessing, Ph.D
Institution: Kenule Beeson Saro-Wiwa Polytechnic, Bori
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7082264926
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