Private Foreign Direct Investment and Portfolio Investment: Key Drivers of Structural Transformation in Nigeria's Economy

This study investigates the impact of Private Foreign Direct Investment (FDI) and Portfolio Investment (PIV) as key drivers of structural transformation in Nigeria’s economy. The aim is to assess how these forms of foreign investment contribute to Nigeria’s economic growth and diversification, particularly in the context of technological advancements and industrial productivity. The study adopts an ex post facto research design, utilizing time-series data from 1995 to 2024 sourced from institutions such as the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS). The research employs a model adapted from Faruque (2021), incorporating variables like Real Gross Domestic Product (RGDP), Gross Fixed Capital Formation (GCF), FDI, and PIV. The study applies unit root testing (ADF), cointegration (ARDL Bounds Test), and post-estimation tests to ensure the reliability of the results. The findings reveal that FDI has a significant positive impact on Nigeria’s economic growth, particularly through technological advancements and industrial productivity. In contrast, PIV shows a negative but weak effect on GDP growth, highlighting the complexities of the Nigerian financial market. The study concludes that while FDI plays a crucial role in driving economic growth, the impact of PIV is more limited and sensitive to market conditions. Therefore, the study recommends strengthening regulatory frameworks, diversifying foreign investments into sectors beyond oil, and enhancing infrastructure to support long-term economic transformation.