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Financial Sector Development, Foreign Direct Investment and Economic Growth in Nigeria

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Abstract

This paper explored the link between financial development, foreign direct investment, and economic growth in Nigeria. Annual time series data spanning 1981 through 2020 were obtained from the Central Bank of Nigeria 2021 statistical bulletin, and utilized in this research. The error correction methodology was adopted in the analysis while the ordinary least squares technique was employed in the estimation. The findings showed that financial development, foreign direct investment, as well as their interaction had no impact on economic growth of Nigeria in the short-run. In the long-run, however, the findings indicated that both financial development and foreign direct investment significantly promoted Nigeria’s economic growth. In addition, the effect of the interaction between financial development and foreign direct investment significantly hindered economic growth of Nigeria in the long-run. The study concluded that financial development and foreign direct investments are relevant determinants of economic growth of Nigeria. Policy focus on financial deepening to expand the absorptive capacities of the domestic economy was some recommendations made.

Keywords

Financial Development
Foreign Direct Investment
Economic Growth

Declarations

Conflict of Interest Statement

The author (s) declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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Bibliographic Information

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  • Submitted
    14 September 2022
  • Revised
    14 September 2022
  • Published
    14 September 2022