Title: Cross-Border Capital Inflows And Economic Performance In Nigeria
Authors: Efemiemie Vivian And Ehiedu, Victor C Ph.D
Volume: 9
Issue: 5
Pages: 129-140
Publication Date: 2025/05/28
Abstract:
This study investigates the impact of cross-border capital inflows on economic performance in Nigeria, with economic performance proxied by Gross Domestic Product (GDP). The study captures cross-border capital inflows through four key indicators: Foreign Direct Investment (FDI), Total Capital Inflows (TCI), External Commercial Borrowing (ECB), and Portfolio Investment Inflows (PII), using annual time series data from 2008 to 2023. Employing the Autoregressive Distributed Lag (ARDL) model, the study examines both the short-run and long-run relationships between the variables. Diagnostic tests including the Breusch-Godfrey Serial Correlation LM Test, Breusch-Pagan-Godfrey Heteroskedasticity Test, Augmented Dickey-Fuller unit root test, and the Ramsey RESET test were conducted to validate model assumptions. The ARDL bounds test result shows no evidence of a long-run relationship between capital inflows and GDP. However, the short-run dynamics reveal that FDI and TCI exhibit a weak but positive and marginally significant effect on GDP, while ECB and PII show statistically insignificant impacts. Furthermore, the Granger causality test indicates the absence of a causal link between GDP and the various forms of capital inflows, suggesting limited feedback effects. The findings imply that although certain forms of capital inflows-particularly FDI and TCI-may contribute to economic performance in the short term, their influence remains weak and statistically fragile. The study recommends the formulation of robust capital inflow management policies and the creation of an enabling macroeconomic environment to attract more productive and growth-inducing foreign capital.