FOREIGN INVESTMENT INFLOWS AND THE STRUGGLE FOR A RENEWED ECONOMIC GROWTH IN NIGERIA: AN ECONOMETRIC STUDY

Aderopo Raphael Adediyan,Emmanuel Ekomoezor

doi:10.29121/granthaalayah.v7.i8.2019.642

Aderopo Raphael Adediyan, Emmanuel Ekomoezor

Open Access

https://doi.org/10.29121/granthaalayah.v7.i8.2019.642

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Abstract

This study attempts to find answer to the question of whether Nigeria should intensify effort to draw home more foreign investment; would more of foreign investment inflows accelerate Nigeria economic performance? Methodologically, annual time series data from 1986 to 2018 was analyzed using ARDL approach. The key findings are that, although FDI has long-run positive impact on economic growth, FPI has no operational effect on the growth; this is true of FPI both in the long-run and short-run. Furthermore, labour force and trade openness were found to have long-run and short-run positive impact on growth. Hence, government must tactically open up economy to trans-border trade, increase labour supply and intensify effort to attract more FDI.

Highlights

One of the economic benefits of an open economy is the free movement of capital or assets in the form of foreign investment
The key findings are that, foreign direct investment (FDI) has long-run positive impact on economic growth, Foreign Portfolio Investment (FPI) has no operational effect on the growth; this is true of FPI both in the long-run and short-run
Estimation Method The estimation method adopted follows the Autoregressive Distributed Lag (ARDL) Bound testing approach suggested by Pesaran et al (2001)

Summary

Introduction

One of the economic benefits of an open economy is the free movement of capital or assets in the form of foreign investment. Foreign investment is believed to complement domestic investment; a perceived prerequisite to the achievement of a sustained rate of economic growth. Economic literature suggested foreign portfolio investment and foreign direct investment as the two basic forms in which the foreign investment may be classified. Foreign portfolio is an aspect of foreign capital flows, consisting of financial assets like stocks and bonds in the financial markets. One key feature of foreign portfolio investment that is often an issue of concern is its level of volatility which cannot guarantee or maintained a sustainable economic growth (Ahmad et al, 2004; Obadan, 2004)

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