ABSTRACT

This study aims at investigating the impact of Foreign Capital Inflows on Economic Development in Nigeria using annual time series data for the period 1999 – 2022. The main objective of this research is to investigate the relationship between foreign capital inflows and economic development. The variable considered are economic development, foreign direct investment, inflation rate and exchange rate. Economic development is proxied by real gross domestic product which is the dependent variable of the study, while foreign direct investment, inflation rate and exchange rate are the independent variables.   Augmented Dickey-fuller (ADF) test was used to test for the stationarity of the variables and they were found to be stationary at first difference. Then Johansen co-integration technique was used to establish if the stationary variables are co-integrated in the long run. Further, ECM is employed to correct any form of disequilibrium in the short run. The result of stationarity test reveals that the model is well specified and could be used for policy analysis. The analysis was based on data extracted from Central Bank of Nigeria (CBN) statistical bulletin and World Development Indicators (WDI). The results of the analysis show that exchange rate has a positive relationship with economic development in the long run and a negative relationship in the short run but statistically significant both in the long and short run. Inflation rate has a negative relationship with economic development both in the long and short run and it is statistically insignificant in both periods. Foreign direct investment also has a positive relationship with economic development both in the long and short run and it is also statistically significant in both periods. The study recommended more investment incentives to investors. Also, government should ensure that exchange rate is well monitored.