The Impact of Foreign Direct Investment on Capital Formation in Nigeria: A Co-Integration Approach
International Journal of Economics, Finance and Management Sciences
Volume 2, Issue 2, April 2014, Pages: 188-196
Received: Jan. 5, 2014; Accepted: Apr. 16, 2014; Published: Apr. 20, 2014
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Ugwuegbe, Sebastine Ugochukwu, Department of Banking and Finance, University of Nigeria, Enugu, Nigeria
Modebe, Nwanneka Judith, Department of Banking and Finance, University of Nigeria, Enugu, Nigeria
Onyeanu Edith, Department of Accountancy, University of Nigeria, Enugu, Nigeria
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In this work, we investigated the impact of FDI on capital accumulation in Nigeria for the period of 1986-2012. The data was generated from CBN statistical bulletin, OLS method of estimation was adopted for the analysis of the data generated. ADF test was applied to determine the stationarity of the variables and all the variables were integrated at order one I(1). The Johanson co-integration test shows the existence of at most 2 co-integrating equation in the model. The ECM indicates that 73.24% of the disequilibrium in the model will be corrected on annual bases. The OLS estimation indicates that FDI, TCR, and INTR positively but insignificantly effect capital formation in the short-run whit GEXP exerting negative effect on GFCF. The result also indicate that in the long-run all the variables included in the model has a positive impact on GFCF with only FDI and TCR exerting a significant impact on capital accumulation in Nigeria for the period under review. There is bidirectional causality between FDI and GFCF. Effort should be made by government to attract more FDI into the country as it has the potential to improve the capital formation in the economy which in the other hand leads to growth in the economy at large. It is also important that government should improve the infrastructural facility in the country as this has a great potential for attracting more FDI into the country. The issue of insecurity should also be addressed without delay if we are to move the economy to the desired direction
Foreign Direct Investment, Gross Fixed Capital Formation, Total Bank Credit to Private Sector, Interest Rate, Government Expenditure, Co-integration
To cite this article
Ugwuegbe, Sebastine Ugochukwu, Modebe, Nwanneka Judith, Onyeanu Edith, The Impact of Foreign Direct Investment on Capital Formation in Nigeria: A Co-Integration Approach, International Journal of Economics, Finance and Management Sciences. Vol. 2, No. 2, 2014, pp. 188-196. doi: 10.11648/j.ijefm.20140202.21
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