Abstract
This study estimates the impact of Foreign Capital Inflows on economic growth in Nigeria from 1986Q1 – 2014Q4. For empirical analysis, the paper adopts the Auto-Regressive Distributed Lag- Unrestricted Error Correction Model (ARDL-UECM). Empirical evidence from the ARDL-bounds Co-integration Test shows there is co-integration between Economic Growth (proxied by Growth rate of Real Gross Domestic Product) and Foreign Capital Inflows (disaggregated into Foreign Direct Investment, Foreign Portfolio Investment and Workers’ Remittances) in Nigeria. The results also show that apart from remittances, other components of Foreign Capital Inflows have significant impact on Economic Growth in Nigeria. The study therefore recommends that Government should, alongside other economic activities, provide an enabling economic environment for more Foreign Capital Inflows. Also the financial sector should be improved so that workers’ remittances can be efficiently tracked through the banking channels and also put to productive use. This is how to minimize the negative impact of workers’ remittance inflows into Nigeria.
Highlights
Economists have long recognized capital as one of the core elements in economic development
According to World Bank Report (2011) foreign capital inflow Nigeria was reported at ₦7. 7 billion in 2011
Here comes the pertinent question, "Does foreign capital play a helpful or non-helpful role economic growth in Nigeria economy?" Existing global guidelines supporting the inflow of capital suggest that first, capital should flow from rich countries to poor countries
Summary
Economists have long recognized capital as one of the core elements in economic development. Capital deficient countries have always resorted heavily to foreign capital as a means of supplementing domestic resources to achieve economic targets It has been argued in the literature that international capital flows have the potential to bring a variety of benefits to recipient countries, which include augmenting domestic savings, reducing cost of capital through better allocation of risks, transferring technology and managerial expertise, stimulating employment opportunities as well as promoting economic growth. Here comes the pertinent question, "Does foreign capital play a helpful or non-helpful role economic growth in Nigeria economy?" Existing global guidelines supporting the inflow of capital suggest that first, capital should flow from rich countries to poor countries.
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