Asymmetric Analysis of the Impact of Foreign Capital Inflows on Economic Growth in Nigeria

Daniel Akoh Atakpa, Christopher Ulua Kalu, Uju Ezenekwe (), Kenechukwu Okeyika and Emmanuel Chinanuife
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Daniel Akoh Atakpa: Department of Economics, Prince Abubakar Audu University, Anyigba, Kogi State, Nigeria. Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria.
Christopher Ulua Kalu: Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria.
Kenechukwu Okeyika: Department of Economics, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria.
Emmanuel Chinanuife: Department of Economics, Topfaith University, Mkpatak, Akwa Ibom State, Nigeria.

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 7, 987-997

Abstract: Foreign capital inflows remain volatile and their impact on economic growth remains uncertain due to persistent challenges relating to policy inconsistence insufficient infrastructure and fluctuations in Global oil price. The volatility of these inflows posed challenges, raises concern on their impact on economic growth. This study examined the impact of foreign capital inflows on economic growth in Nigeria from 1990 – 2023.The variables of interest are real gross domestic product (RGDP), foreign direct investment (FDI), remittance (REM) foreign portfolio investment (FPI) official development assistance (ODA) external debt (ED) government expenditure on health (GEH) and government expenditure on education (GEE).This study employed a Nonlinear Autoregressive Distributed lag (NARDL) model and Granger causality test. The finding from the NARDL model showed that Foreign Direct Investment, Remittances, Official Development Aid, External Debt, government expenditure on health, and government expenditure on education all exhibit substantial impacts, with positive changes in these variables associated with increased economic growth, and negative changes leading to decreased economic growth in both short and long run period. The finding further revealed significant asymmetric impacts between Foreign Direct Investment, Remittances, Official Development Aid, government expenditure on health, and government expenditure on education with exception of External debt in the short run .This study recommends that to unlock Nigeria’s full growth potential, policymakers should boost absorptive capacity of the economy through improve infrastructure, security, and legal frameworks to effectively utilize incoming capital and accelerate sustainable economic growth. Furthermore, prioritize health and education spending to develop a skilled and healthy workforce, ultimately boosting domestic activity and productivity.

Date: 2024
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