Title: Impact Of Foreign Inflows On Domestic Investment In Nigeria
Authors: OKOLIE, Joseph Obi , AYEWUMI, Ezonfade Fredrick , Prof. ONUORAH, Anastasia Chi-Chi (F, CIFIAN)
Volume: 10
Issue: 1
Pages: 398-409
Publication Date: 2026/01/28
Abstract:
This study investigates how foreign capital inflows affect domestic investment in Nigeria between 1994 and 2024, using the ARDL model. The inflows are categorized into Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Official Development Assistance (ODA), and Diaspora Remittances (DR). Data were obtained from the Central Bank of Nigeria, World Bank, and National Bureau of Statistics. The analysis included unit root tests, co-integration, and diagnostic checks to assess both short-run and long-run relationships. Findings reveal that FDI significantly boosts domestic investment, reinforcing its role in capital formation and long-term growth. ODA also has a positive and significant effect, suggesting its support for public infrastructure and development. In contrast, FPI negatively affects domestic investment, likely due to its short-term, speculative nature. Surprisingly, diaspora remittances show a negative impact, indicating that much of the inflow goes toward consumption rather than productive ventures. These results highlight that the type and usage of foreign inflows matter. The study recommends policies to attract more FDI by improving the investment climate, managing FPI volatility, ensuring better utilization of aid, and creating channels that direct remittances into investment rather than consumption. Ultimately, how Nigeria manages and channels foreign inflows plays a critical role in shaping their impact on domestic investment.