FOREIGN CAPITAL INFLOWS, INSTITUTIONAL QUALITY, AND ECONOMIC GROWTH IN NIGERIA
Authors: Ibrahim Musa Abubakar
DOI: 10.5281/zenodo.17311494
Published: October 2025
Abstract
<p><em>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 economic growth 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 Gross Domestic Product (GDP) as the dependent variable. ARDL technique was used and the result revealed that foreign direct investment has a negative impact, foreign portfolio investment, external debt and institutional quality have positive impact on GDP. This result confirms the existence of a long-run relationship among foreign capital inflows, institutional quality, and economic growth in Nigeria. FDI, contrary to expectation, appears to undermine economic growth, while external debt contributes positively. These findings have critical implications for policy, particularly the need to redirect capital inflows toward productive sectors, ensure fiscal responsibility, and strengthen institutions for sustainable development</em></p>
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