Abstract
This paper empirically investigated the growth implications of foreign portfolio investment inflows and foreign portfolio investment outflows in Nigeria over the period 1986 to 2018. Secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, National Bureau of Statistics (NBS) and World Development Indicator (WDI) was used for examining the relationships among the endogenous variable and exogenous variables included in the model. The study employed Augumented Dickey Fuller (ADF) unit root test, Phillips-Perron (PP) unit root test, Johansen co-integration test, Ordinary Least Square (OLS) multiple regression technique to investigate the relationships among real gross domestic product (RGDP), foreign portfolio investment outflows (FPI), foreign portfolio investment inflows (DPI), exchange rate (EXGR) and inflation rate (INFR). Empirical findings revealed that foreign portfolio investment inflows (DPI) exerted statistically significant positive relationship with economic growth (RGDP) whereas foreign portfolio investment outflows (FPI) exhibited statistically significant negative relationship with economic growth (RGDP) in Nigeria over the studied period. Based on the estimated results, government at all levels in Nigeria should create enabling environment for the attraction of foreign portfolio investment inflows in order to spur economic growth; and monetary authorities in Nigeria should ensure stabilization of capital and money market activities with appropriate policies to sustain internalization and attractiveness to investors. Keywords: Foreign portfolio investment outflows, Domestic portfolio investment inflows, Economic growth, Ordinary Least Square Regression, Nigeria DOI: 10.7176/JESD/13-2-02 Publication date: January 31 st 2022
Highlights
All economies of the world consider the inflows and outflows of capital especially private capital as one of the major factors or instruments essential for rapid economic growth and development of their respective countries
Foreign investments can be attracted into an economy through two major channels namely foreign direct investments (FDI) which involves direct ownership of business entities in foreign countries and foreign portfolio investments (FPI) which refers to investing in the securities and other financial assets of a foreign country such as stocks, bonds, mutual funds, exchange traded funds, American depository receipts (ADR) and global depository receipts (GDR)
Data and Methodology This study investigated the effect of foreign portfolio investment inflows or domestic portfolio investment (DPI) and foreign portfolio investment outflows (FPI) on economic growth in Nigeria for the period 1986 to 2018 using secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin of various editions and World Bank Development Indicator (WDI) database
Summary
All economies of the world consider the inflows and outflows of capital especially private capital as one of the major factors or instruments essential for rapid economic growth and development of their respective countries. Foreign portfolio investment inflows and foreign portfolio investment outflows are seen by both advanced economies and developing countries of the world as valuable sources of finance and capital formation. These two types of investment play significant role to developing economies or underdeveloped countries in that it increases capital accumulation for production activities, technology transfer and know-how, improvement of balance of payments, creation of business opportunities and generation of huge revenue via taxation by governments. Few studies exist relating to the nexus between foreign portfolio investment (inflows and outflows) and economic performance in Nigeria due to paucity of data on related economic variables
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