Impact of Foreign Capital Inflows and Institutional Quality on Inflation in Nigeria

Rukayat Abideen Yusuf, Michael S. Akpan and Marvelous Aigbedion
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Rukayat Abideen Yusuf: Department Of Economics Bingham University, Karu. Nasarawa State, Nigeria
Michael S. Akpan: Department Of Economics Bingham University, Karu. Nasarawa State, Nigeria
Marvelous Aigbedion: Department Of Economics Bingham University, Karu. Nasarawa State, Nigeria

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 9, 2453-2466

Abstract: For any developing country with an investment gap to achieve a desired rate of economic growth, foreign investment has to be given due consideration. Thus, foreign capital inflows are believed to be able to drive the Nigerian economy towards achieving her desired level of macroeconomic goals. The paper examined the impact of foreign capital inflows and institutional quality on inflation in Nigeria from 1990 to 2023. The paper used explanatory variables Foreign Direct Investment (FDI) Foreign Portfolio Investment (FPI) External Debt (EXD), institutional quality (IQ)and Inflation (INF) as the dependent variable. ARDL technique was used and the result revealed that foreign direct investment and institutional quality have significant impact on inflation. This result confirms the existence of a long-run relationship among foreign capital inflows, institutional quality, and inflation in Nigeria. While FPI and external exhibited significance only in the short run. These findings have critical implications for policy, particularly need to redirect capital inflows toward productive sectors, ensure fiscal responsibility, and strengthen institutions for sustainable development.

Date: 2025
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