ABSTRACT

This study examines the factors that determine the inflow of international capital into the Nigeria economy. Foreign Capital flow may become volatile and menacing to the domestic economy if a thorough study of its determining factor is not carried out. Annual time series data covering the period 1986 to 2013 was used in a dynamic frame work which includes the adoption of Vector Auto Regression (VAR) methodology approach.

The findings reveal that domestic factors like total external debts, and real GDP are significant determinants of FPI while total external debt, inflation rate, and openness of the economy are significant determinants of FDI, also foreign factors like foreign exchange reserve and FPI affects FPI and FDI respectively.

The paper also reveal that Domestic Interest rate was not high enough to induce the flow of International Capital. It is only subject to economic theory postulations, where increased interest rate attracts foreign flows into the Nigeria economy but the reverse is the case on the VAR model

The study recommends policy aimed at improving the inflow of International Capital into the Nigeria country.