THE GROWTH IMPACT OF FOREIGN PRIVATE CAPITAL IN NIGERIA

Abstract

This study examined the impact of foreign private capital (which is the portmanteau for foreign direct investment and foreign portfolio investment) on economic growth in Nigeria, using secondary data for the period 1990 to 2019. Foreign private capital flow consists of net foreign direct investment and portfolio investment. The study used the gross domestic product as the independent variable and a proxy for economic growth while foreign direct investment, foreign portfolio investment, exchange rate, real interest rate, gross fixed capital formation, and inflation rate were used as explanatory variables. The data on the study variables covering the period 1990 to 2019 were collected from the CBN Statistical Bulletin. The study employed the descriptive statistics and empirical estimation techniques (which consist of Augmented Dickey Fuller, Johansen co-integration, and Error correction model as method of data analysis. The results of analysis revealed that all the explanatory variables used in the study had a positive and significant impact on economic growth. However, foreign private capital (foreign direct investment and foreign portfolio investment) was not significant at 5%. Based on the results of the empirical analysis, the study concluded that foreign direct investment and foreign portfolio investment have positive impact on the growth of the Nigerian economy. Nevertheless, the Federal government needs to create more conducive and investment-friendly climate to attract enough foreign investors into the productive sectors of the economy (by identifying and eradicating the root cause of terrorism in Nigeria and its sponsors). The study therefore recommended that the monetary and fiscal authorities in Nigeria should formulate formidable economic policies and create the enabling business environment that is capable of attracting foreign investment into Nigeria.