EMPIRICAL ANALYSIS OF SELECTED DETERMINANTS OF CAPITAL FLOW IN NIGERIA

This study evaluates how selected factors have influenced capital inflow in Nigeria. This study observes the fact that Capital inflow may be unstable and threatening to the Nigerian economy if an in-depth study of selected determinants of the flow in Nigeria is not investigated. By this observation, the study uses annual time series data collected from the Central Bank of Nigeria to cover 1986 to 2025. This study uses a multiple regression to analysis the variables in the model and such includes cointegration and error correction method of analysis. The study in the cause of the investigation finds out that external factors like external debt, foreign exchange reserve, and foreign interest rate are the major factors influencing capital flows in Nigeria and this flow is grouped into foreign direct investments and foreign portfolio Investments. The results further reveal that, domestic macro-economic variables such as inflation rate, real gross domestic products and external debts, are the major factors influencing capital flows on the long run in Nigeria. Based on the results of the findings, the study makes the following recommendations and these include: policy measures designed to direct long run capital inflows and changing the short run patterns of the capital flow into the Nigerian economy. The study also recommends that clumsy inflow of portfolio investment should be lessened by using appropriate policies. It further recommends that agents of government and its authorities should put in place machineries that will make the domestic capital market more attractive to foreign investors to invest in Nigeria. The study also recommends that appropriate portfolio management policies which will influence currency composition and choice of investment instruments that will reflect a country's precise policy settings and conditions should be put in place by the government. Further, it is equally recommended that sound reserve management policies and practices to improve the flow should be used by the government. Above all, the study recommends a healthy macroeconomic and financial system that will attract quality foreign investors into Nigeria for profitable investment.