Effect of International Capital Inflows on Economic Growth of Nigeria

Abstract

The study examined the effect of international capital inflows on economic growth of Nigeria for the periods, 1986 to 2016. The study employed four core channels of international capital inflows which includes foreign direct investment (FDI), official development assistance (ODA), personal remittances (REM), and external debt stock (EXTDS) into Nigeria as the explanatory variables and GDP growth rate as the dependent variable. The model of the study was hinged on the Harrod-Domar growth model and employed Johansen co-integration and Ordinary Least Square (OLS) techniques for data analyses. The result showed that international capital inflows have long run effect on economic growth of Nigeria. Specifically, the OLS revealed that FDI and REM had significant positive effects on economic growth. However, EXTDS and ODA had no significant effects on economic growth. The study further showed that international capital is a powerful tool for boosting economic growth of Nigeria(R-square = 71%). The recommendations among others include that policy makers should forthwith discourage the use of external debt and official development assistance in Nigeria.