Authors: Christian FridayAgbo, Fredrick Onyebuchi Asogwa, Nicholas Attamah
Abstract: This study examined the impact of international capital inflow on economic growth in Nigeria using time series quarterly data from 1991Q1 to 2023Q4. The specific objectives of the study were to evaluate the impact of international capital inflow on economic growth; determine the direction of causality between international capital inflow and economic growth and to determine the nature of the relationship between international capital inflow and economic growth in Nigeria. The study carried out pre-estimation tests to check for the order of integration and the existence of a long run relationship among the variables. Classical Multiple Regression Model and the Autoregressive Distributed Lag (ARDL) model were applied. The Classical Multiple Regression Model was adopted because of its Best Linear unbiased Estimator (BLUE) property while ARDL was used to capture both long run and short run dynamics. The variables used in the study were the growth of the Real Gross Domestic Product (RGDPgr), Foreign Direct Investment (FDI), Exchange Rate (EXR), Remittances, Trade Openness (TOP)), and the Gross Fixed Capital Formation (GFCF). The findings of the study showed a significant negative impact of the Foreign Direct Investment (FDI), Gross Fixed Capital Formation (GFCF) on economic growth in Nigeria. The result also showed that Exchange Rate (EXR), Remittances (REM), and Trade Openness (TOP) had positive significant impact on economic growth in Nigeria. The result of the ARDL indicated that remittances and gross fixed capital formation had negative and insignificant impact on economic growth in Nigeria while Trade Openness (TOP) had significant positive relationship with economic growth both in the short run and the long run. The result of the co-integration test indicated a long run relationship between international capital inflow and economic growth in Nigeria. The study also found no evidence of direction of causality relationship between capital inflow and economic growth. The study therefore recommends the need to consciously improve the business environment such as insurgence, kidnapping and other related security threat to enable capital inflow contribute more to economic growth in Nigeria. The study also recommends that government should develop Nigeria’s local financial markets for easy inflow of capital.
