External Reserve and the Elasticity of Substitution between Domestic and Foreign Investment in Nigeria

During the late 1970s and early 1980s, many African countries experienced a profound slowdown in economic growth. The growth rate of real per capita GDP fell from 0.4% per year during the 1973-80 period to 1.2% per year during the 1980-89 period.' The causes-internal and external-of Africa's economic decline and the strategies for restoring economic growth are much debated. Nevertheless, broad consensus has emerged on the importance of (i) increasing total investment and (ii) promoting private-sector development and increasing its share of total investment for long-term growth.2 It is widely recognized that gross domestic investment fell substantially in Africa during the 1980s and remains severely depressed across the region. The proportion of total domestic investment in GDP fell from 20.8% per year during 1973-80 to 16.1% per year during 1980-89. In some countries, investment has fallen to less than 10% of GDP-a level that is insufficient even to replace depreciated capital. In Africa, the minimum investment needed to replace depreciated capital is estimated at 13% of GDP.3 In recent years, there has also been a growing recognition among many African leaders, faced with new realism and pragmatism, that the private sector could play a significant role in economic development. The focus in the longer term of structural adjustment programs and sectoral reforms adopted by these countries is on creating more appropriate incentives and a framework for private-sector development as the basis for achieving sustainable economic growth. In addition, multilateral and bilateral institutions have developed new initiatives with priorities for private-sector development. In 1989, the International Finance Corporation, an affiliate of the World Bank, es-

Foreign Direct Investment, Domestic Investment and Green Growth in Nigeria: Any Spillovers?

Globally, investments in physical and human capital have been identified to foster real economic growth and development in any economy. Investments, which could be domestic or foreign, have been established in the literature as either complements or substitutes in varying scenarios. While domestic investments bring about endogenous growth processes, foreign investment, though may be exogenous to growth, has been identified to bring about productivity and ecological spillovers. In view of these competing–conflicting perspectives, this chapter, examines the differential impacts of domestic and foreign investments on green growth in Nigeria during the period 1970–2017. The empirical evidence is based on Auto-regressive Distributed Lag (ARDL) and Granger causality estimates. Also, the study articulates the prospects for growth sustainability via domestic or foreign investments in Nigeria. The results show that domestic investment increases CO2 emissions in the short run while foreign investment decreases CO2 emissions in the long run. When the dataset is decomposed into three sub-samples in the light of cycles of investments within the trend analysis, findings of the third sub-sample (i.e. 2001–2017) reveal that both types of investments decrease CO2 emissions in the long run while only domestic investment has a negative effect on CO2 emissions in the short run. This study therefore concludes that as short-run distortions even out in the long-run, FDI and domestic investments has prospects for sustainable development in Nigeria through green growth.

The Paper investigates the elasticity of substitution between foreign direct investment (FDI) and private domestic investment on the external reserves of some selected 14 African countries. To achieve the objective of the best substitutability of investment suitable for Africa, using data on gross fixed capital formation as a proxy for private domestic investment, inflation, external reserves, and foreign direct investment. From the Empirical literature reviewed, studies on the substitutability of investments in external reserves in Africa have not yet been addressed. The Dynamic General Methods of Moments (DGMM) was employed for the analysis since the African countries are more than the scope of the study which ranges from 2010 to 2022. The results show that foreign direct investment is preferred to private domestic investment in Africa. Additionally, the elasticity of substitution from FDI to domestic private investment was found to be stronger and more elastic than the contrary. Therefore, the study recommends that African countries should focus on strengthening fixed assets to create more revenue from additional fixed assets which would impact more on the external reserves of Africa, by attracting foreigners.

Does foreign investment crowd in domestic investment? Evidence from Vietnam

This paper contends that a good indicator of confidence in the stability of Nigerian economy is the significant inflow of foreign direct investment. Foreign capital inflow to Nigeria in recent years has not been significant. The object of the paper is to examine how the current democracy contributed significantly to improvement in overall domestic and foreign investment in Nigeria. The assumption of the study are that the deregulatory policy of the current democratic government will not stimulate significant foreign investment. Using descriptive historical and content approach and chi-square methodology of statistical analysis, the study reveals that the new democratic government of president Obasanjo continues to create an enabling environment for domestic and foreign direct investment in Nigeria. The policy initiative has encouraged the agro-based industries and telecommunication. In the telecommunications, the introduction of GSM phones, wireless tech, and Internet Service has improved communication. Journal of Research in National Development Vol. 3 (2) 2005: pp. 87-95

THIS DISSERTATION examines the short-run relationships between domestic and foreign investment of U.S. manufacturing firms and the financing of such investment. A short-run framework provides results relevant to American balance-of-payments policy; in the long run, repatriated earnings, fees and royalties, and (possibly) increased exports offset some or all of the initial balance-of-payments cost of direct investment. Thus, if direct investment outlays are recouped in the U.S. balance-ofpayments, changes in such outlays affect primarily the timing of balance-of-payments deficits. To maximize a discounted stream of worldwide profits, management of a firm makes interrelated decisions concerning domestic and foreign investment. To the extent that foreign and domestic investment are related, foreign investment, and therefore balance-of-payments flows, will be related to the level of domestic economic activity as it impinges on the firm. In addition, the financing of direct investment may be related to domestic activities of the firm. The decision variables in the study are foreign and domestic plant and equipment expenditures, dividend payments to stockholders, and outflow, defined as net capital outflow less repatriated profits. The last variable represents the immediate effect of direct investment on the balance of payments. In general, foreign investment is a function of sales changes, foreign and domestic income, foreign depreciation allowances, dividends, domestic investment, and the leverage of the firm. Specifically, inducement to invest is represented by lagged sales changes and by expected sales changes, as proxied by the firm's stock price relative to the stock market. The domestic investment equation is specified analogously. The dividend equation follows a typical partial adjustment form but allows for separate reaction to a transitory component of current income. Dividend policy is also allowed to respond to investment and leverage. Net outflow is expected to be positively related to both domestic income and foreign investment and negatively related to foreign income, dividends, and domestic investment. It may be negatively related to domestic investment even if foreign and domestic investment are not substitutes. Separate firm intercepts are used to control long-run differences between firms, and thereby to isolate short-run behavior. Appropriate scaling is made to adjust for existing interfirm differences in foreign activity. The data are then normalized by previous-year capital stock of the appropriate sector (foreign, domestic, or total) of each firm. Two-stage least squares estimation is applied to annual data for 63 large U.S. manufacturing firms. Estimation is for the period 1961-1966, a period in which direct investment was relatively free from capital restrictions of host countries and the United States. A dummy variable represents the impact of firm-level targets in the 1966 U.S. voluntary balance-of-payments program. Its positive but insignificant coefficient suggests that firms, anticipating stricter controls, may have increased their foreign investment.

Stuart R.Lynn’s statement, on the advanced countries, Gross Domestic Product (GDP) was affected dominantly by investment productivity rather than by its investment. Meanwhile, on the developing countries, GDP was affected dominantly by investment rather than by the productivity. Within connection of Lynn’s proposal, t he purpose of this research is to find out the influence of investment and investment productivity of domestic, foreign, and government on Gross Domestic Regional Product (GDRP) of DKI Jakarta region with the purpose to investigate: how far the influences of investment and investment productivity of domestic, foreign and government simultaneously and partially on GDRP of DKI Jakarta region and to analyze the difference of the influence among the kind of investment and its productivity on GDRP of DKI Jakarta region. This research used explanatory study that is to explain relationship among variables and hypotheses testing about the existence of the relationship among variables. Research data are secondary data concerning GDRP, domestic investment, foreign investment, and government investment which collected since 1991 up to 2007. The hypotheses about influences of domestic, foreign and government investment and their productivity on GDRP, both simultaneously and partially, are tested using Multiple Linear Regression Analysis through the Ordinary Least Square method under 5% level of significance. The influences of domestic, foreign and government investment and their productivity simultaneously on GDRP of DKI Jakarta region are significant and very strong. Partially, government investment, government investment productivity and domestic investment productivity has positive effect on GDRP. Foreign investment productivity has negative effect, while the influences of domestic and foreign investment don’t have significant impact. Besides, this research has found differences of the influence among the kind of investment and among the kind of investment productivity. However, GDRP growth was more affected by the government investment. It has been revealed that the influence of government investment is stronger than its investment productivity. It is also shown the influence of domestic investment is stronger than its investment productivity. For foreign investment, the influence of the investment has positive sign, meanwhile the investment productivity has negative sign. The elasticity trend of productivity of domestic and foreign investment increased, meanwhile elasticity of government investment decreased. Also it has been found the existence of negative correlation among investment with its productivity consistently from domestic, foreign and government sources. This research succeed to prove that GDRP of DKI Jakarta is more influenced dominantly by accumulation of investment rather than by its productivity. The result of this research recommends that the investment productivity factor is the factor that must be attention and more increasing it’s role by every stakeholder. That’s mean to decrease load of investment accumulation that’s forever using the capital addition.

Emergence of internet banking in the world has affected both domestic and foreign investment across countries. However, the level at which countries absorbs the internet banking for investment purposes vary across countries. This study examines the internet banking and domestic investment nexus in Nigeria. In order to achieve this, two objectives were utilized: to examine the nature of the relationship between internet banking and domestic investment and to determine the extent of the effect of internet banking on domestic investment in Nigeria. The study used quarterly data from the period of 2012 to 2022. The stationarity of the data was tested using Augmented Dickey and Fuller Unit root test and the co-integration was done using bound test approach. The data were analysed using an autoregressive distributed lag model. The findings show that ATM has positive and significant effect on domestic investment in the long run but in the short run, it exerts negative and significant effect; interest rate has insignificant effect on domestic investment in the short run while in the long run it has negative and significant effect; Mobile Money (MM) has negative effect on domestic investment in the short run while in the long run it has a positive effect on domestic investment; NEFT has positive and significant effect on domestic investment in the short run while in the long run, it does not exert significant effect on domestic investment and; POS has positive and significant effect on domestic investment in the short run whereas in the long run, it has negative and significant effect on domestic investment. The study therefore recommends that internet banking should be encouraged and that internet banking security should be strengthened to increase the confidence of investors.

Capital flight can cause challenges regarding the domestic availability of financial resources in sustaining domestic investment in Nigeria. The purpose of this study is to examine the connection between capital flight components and domestic investment in Nigeria. The study employed the autoregressive distributive lag model (ARDL) to analyze the time series data for Nigeria spanning from 1981 to 2018. The study found that changes in external debt, current account balance, and foreign direct investments have a negative effect on domestic investments in the short run and long run. Furthermore, the results obtained show that the intercept has a positive effect on domestic investment. The long-run coefficient of current account balance has a positive effect, while the other components of capital flight – foreign direct investment, external reserves and external debt – have a negative effect on domestic investment. The error correction coefficient is significant and conforms to the a priori expectation. Hence, the study concludes that growth in domestic investment can be achieved by regulating the components of capital flight within the desirable limits. The study recommends that emphasis should be placed on the components of capital flight to stimulate domestic investment for economic growth.

Indebtedness has become one of the major development policy issues for the Sri Lankan economy. The excessive government borrowings over the capacity of the country cause adverse impacts on an economy, particularly its unfavourable effects on domestic and foreign investment inflows. Therefore, this study investigates the impact of the components of public debts (domestic and external debts) on the various forms of investment (domestic investment and foreign direct investment) in Sri Lanka for the period between 1980 and 2020. Thus, this study estimated two investment models where domestic investment and foreign direct investment were dependent variables. ARDL bounds testing approach was employed in this study which confirmed the existence of a long-run cointegration relationship among the variables. Empirical findings of this study show the evidence for the presence of a crowding out effect of both domestic and external debt on domestic investment in Sri Lanka both in the short-run and long-run. It was also found that domestic debt crowds out FDI inflows in the long-run, but it crowds-in the flow of FDI in the short-run. Furthermore, external debt has a significant inverse relationship with FDI inflows in the short-run, as expected, but it does not influence FDI in the long-run. The findings also showed that higher lending interest rates reduce the volume of domestic investment, but it does not influence FDI in the long-run. However, in short-run, an increase in the rate of lending interest rate lowers the expectation of foreign investors and crowds out the flow of FDI in Sri Lanka, as expected. Furthermore, the depreciation of the exchange rate decreases both domestic and foreign investment in the short-run, but it encourages both types of investments in the long-run. The results further concluded that the impact of domestic debt on various forms of investment in Sri Lanka is greater than external debts. The study, therefore, recommends that the government should strive to reduce its higher debt profile by improving its revenue base and formulate better debt management strategies in order to increase the volume of investment in the country.
 Keywords: Domestic Debt, External Debt, Domestic Investment, Foreign Direct Investment, Sri Lanka

Attracting foreign direct investment (FDI) is not without challenges. Numerous barriers, including political instability, corruption, and macroeconomic policies, have been identified as significant impediments to foreign investment in Nigeria. Therefore, our study evaluates the impact of systemic corruption and political risk on Nigeria’s FDI inflows. Our study employs the autoregressive distributed lag and fully modified ordinary least square models to analyze the key determinants influencing FDI decisions on a comprehensive dataset from 1996 to 2023. The study’s findings reveal that higher levels of corruption and political instability negatively affect FDI inflows, deterring potential investors and undermining economic growth. Furthermore, we explore the moderating role of institutional quality and regulatory frameworks such as political stability and absence of violence, regulatory quality, rule of law and control of corruption in mitigating the adverse effects of corruption and political risk. The results underscore the necessity for robust anti-corruption measures and improved political stability to enhance Nigeria’s attractiveness as an investment destination. The study recommends that addressing these systemic issues through effective anti-corruption measures and enhancing political stability is crucial for creating a more attractive investment climate.HighlightsHigh corruption levels negatively affect foreign direct investment (FDI).A high level of perceived corruption raises transaction costs, reduces efficiency and deters domestic and foreign investment, making it harder to achieve long-term economic growth.GDP growth shows a notable negative correlation with the corruption perception index, implying that combating corruption may enhance economic growth.

Despite the large body of research on foreign direct investment, domestic savings, domestic investment and economic growth, little has been done to investigate the relationships among them. This paper examines the relationships among foreign direct investment, domestic savings, domestic investment, and economic growth in 16 Sub-Saharan African (SSA) countries from 1981 to 2011, using various techniques. The results of VAR estimation and Granger causality tests demonstrate that there is a unidirectional causality from foreign investment to growth and domestic investment, savings to growth, and a bidirectional causality between growth and domestic investment as well as savings and domestic investment. The results of the variance decomposition analysis reveal that foreign investment exerts more influence on growth. Savings are more important in explaining domestic investment, growth is more important in explaining foreign investment, and domestic investment is more important in explaining savings. Based on the results of the impulse response analysis, there is a positive unidirectional causality from foreign investment to growth and domestic investment, savings to growth, and a positive bidirectional causality between savings and domestic investment, both in the short and long-run. Although there is feedback causality between domestic investment and growth, the impact from investment is negative in the short-run and positive in the long-run. Thus, policies that encourage foreign investment and savings are required to boost domestic investment and promote growth, and policies that raise domestic investment will lead to higher savings and growth in SSA.

Foreign investment is essential to economic growth and industrialization in developing nations like Nigeria. This research examines the evolving landscape of foreign investment in Nigeria by analyzing its evolution, key patterns, industry-specific aspects, and their impact on management practices. It investigates the financial outcomes of foreign-owned firms, macroeconomic influences, and the strategic management practices of multinational enterprises. Using a quantitative research design, this study employs financial metrics, market analysis, and regression models to assess investment success. Findings reveal that while foreign investment boosts firm profitability, sector-specific and macroeconomic conditions present both opportunities and challenges. Sectors like telecommunications and consumer goods yield high returns, whereas energy and healthcare face constraints that hinder productivity. Furthermore, macroeconomic factors such as GDP growth, inflation, and exchange rate fluctuations significantly affect investment returns. These insights highlight the need for effective management strategies, including corporate governance, risk mitigation, and market adaptation. To enhance foreign direct investment, policies should focus on stabilizing exchange rates, strengthening regulatory frameworks, and fostering economic conditions that support sustained investment growth.

The Impact of Domestic and Direct Foreign Investment on the Economic Growth in Sudan: Evidence from Granger Causality and VAR Framework Dr. Musa Albur Abstract Foreign Direct Investment and Domestic Investment provide a crucial basis for economic development of any country. This study examines the causes and impacts of Real Gross Domestic Product (RGDP), Real Domestic Investment (DI) and Real Foreign Direct Investment (FDI) in Sudan for the period from 1990 to 2011.The importance of this study stems from the vital role of investment (domestic and foreign) in the development process through enhancing economic growth, improving infrastructure and achieving welfare. This study adopted Vector Autoregressive Model and Granger Causality Test (1969). The study depended on secondary data collected from Central Bank of Sudan and Central Bureau of Statistics. Our empirical evidence suggests that the causality directions running positively in the period (1990-2011). There is unidirectional causality of Foreign Direct Investment (FDI) to Real Gross Domestic Product (RGDP), from Real Gross Domestic Product (RGDP) to Foreign Direct Investment (FDI), from Domestic Investment (DI) to Real Gross Domestic Product (RGDP), from real gross domestic product (RGDP) to domestic investment (DI), from foreign direct investment (FDI) to domestic investment (DI), and from domestic investment (DI) to foreign direct investment (FDI). Granger causality results show that there are no statistically significant implications of the independence causality relationship between Domestic Investment( DI) and Real Gross Domestic Product (RGDP), Real Gross Domestic Product(RGDP) to Domestic Investment( DI), Foreign Direct Investment (FDI) ) to Real Gross Domestic Product (RGDP), Real Gross Domestic Product (RGDP) to Foreign Direct Investment (FDI), Foreign Direct Investment (FDI) ) to Domestic Investment(DI), and Domestic Investment ( DI) to Foreign Direct Investment(FDI). The VAR estimation shows that the coefficients of lagged RGDP significant in the regression of the RGDP, the coefficients of lagged DI significant in the regression of the DI and FDI, the coefficients of lagged DI insignificant in the regression of the RGDP, and the coefficients of lagged FDI insignificant in the regression of the RGDP.The study recommends raising more real financial resources for the purpose of investing in economic and social infrastructure as well as in oil exploration. Industrialization is highly recommended for import substitution purpose and for increasing the value added for Sudan's exports to benefit more from international trade. These require encouraging domestic saving, attraction of foreign funds to supplement the domestic component, strengthening foreign relations, and facilitating the investment procedures and thus achieving economic growth in the country. Full Text: PDF DOI: 10.15640/jeds.v7n4a9