Foreign Aid, Domestic Investment and Consumption in Nigeria: A Causality Analysis

Ezekiel Mijah Elias and Enam Pagiel Abalis
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Ezekiel Mijah Elias: Department of Economics, Adamawa State University, Mubi – Nigeria
Enam Pagiel Abalis: Department of Economics, Adamawa State University, Mubi – Nigeria

International Journal of Research and Innovation in Social Science, 2020, vol. 4, issue 9, 748-754

Abstract: Foreign aid are originally provided as supplement to domestic investment in the recipient economies, however there are argument that in some instances foreign aid would rather promote domestic consumption in the recipient economies. This research therefore aimed at investigating the role of foreign aid in explaining the behaviour of domestic investment and consumption in Nigeria within the period 1981 to 2018. The research adopted the Toda – Yamamoto approach to causality and found that, multilateral aid explained the behaviour of domestic investment in Nigeria, but bilateral aid is not significant in explaining the behaviour of domestic investment in Nigeria. In addition, the research also found that both multilateral and bilateral aid are significant in explaining government consumption expenditure in Nigeria. Based on these findings, the researcher strongly recommends the use of multilateral channel of aid delivery against the traditional bilateral mode of aid delivery.

Date: 2020
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