Foreign Investment and Capital Market Growth in Nigieria

Abstract

The study of foreign investment and capital market growth in Nigeria was necessary to examine whether Foreign Direct Investment and Foreign Portfolio Investment enhanced Market Capitalization in Nigeria from 1999 to 2022. Auto-regression distributive lag was used with E view 10 statistical tool while the data source is secondary. The study is motivated by the fact that using foreign investment funds can boost the growth of capital market in Nigeria. The statistical result shows that FDI has positive and significant effect on Market Capitalization while FPI ,interest rate were not statistically positive and has no significant effect on Market Capitalization in Nigeria. It was concluded that foreign investments was partly positive and has significant effect on the growth of Nigerian Capital Market. The study recommended policymakers to improve or create investment friendly policies, strategies to attract financial intermediaries towards investment for more liquidity effeciency in the Nigerian firms, since investment increases liquidity of domestic capital markets.and can help develop market efficiency. Utilization of foreign direct investment funds contributes to the market liquidity effeciency to enable capital market growth in Nigeria. Moreso, foreign portfolio investment having, strong and well-regulated financial markets are necessary to deal with the inherent volatility. The financial system must have the capacity to assess and manage risks if it is to prudently and productively invest capital flows into foreign or domestic capital market.