Inflows of Foreign Capital, Tool for Economic Development: the Nigerian Experience.

This study examined that extent to which Foreign Capital Inflows promote Economic Development in Nigeria using time series data sourced from the World Bank Data base and the Central Bank of Nigeria Statistical Bulletin. The study scope covers the period 1980 to 2019 where foreign capital inflows is decomposed into Foreign Direct Investment, Foreign Portfolio Investment, Foreign Aids, External Borrowing and Personal Remittance while Misery Index is used as proxy for economic development. The study employed Stationarity Test, Long Run Bound Test, Long Run Auto Regressive Distributed Lag, Granger Causality Test and Residual Diagnostic Test. Findings show that Foreign Direct Investment significantly influence economic development in Nigeria in a negative manner while External Borrowing appear to be the only variable that exhibited a positive and significant relationship with Economic Development. However, result further shows that Foreign Portfolio and Personally Remittance has the capacity of influencing Economic Development in Nigeria if properly channeled. As such, this study conclude that of the five decomposed measure of Foreign Capital Inflows, only two (Foreign Direct Investment and External Borrowing) significantly promote Economic Development in Nigeria. Although, the contribution of Foreign Direct investment to development is inversely related. On this basis, we recommend that more investment friendly environment such as (adequate security, electricity stability, pocket friendly tax rate for foreign investors, good road network nationwide) should be considered as this will help attract more foreign investors and further keep the existing once as the exit of most of these foreign investors from the Nigerian region is the reasons for its negative effect on the Nigerian econom