Cross-Border Financial Capital Inflow: an Analysis of Growth and Households Income Inequality in a Resource-Rich Economy

Abstract Nigeria is a resource-rich economy that generates substantial revenues from crude oil and other mineral resources. These endowments make the country an attractive destination for foreign investment and other forms of international capital inflows that are expected to stimulate economic growth and improve household welfare. This study examines the effects of cross-border financial capital inflows on economic growth and income inequality in Nigeria over the period 1970–2023. The analysis considers foreign direct investment, foreign portfolio investment, external debt, remittances, and official development assistance, while governance effectiveness is incorporated as an interaction variable. Using an Engle-Granger residual-based cointegration framework and the Augmented Dickey-Fuller unit root procedure, the study investigates the long-run relationship between international capital flows, gross domestic product, and income inequality. Findings reveal long-run equilibrium relationship between international capital inflows and economic growth. The study recommends strengthening institutional quality and promote policies that enhance the developmental impact of capital inflows. JEL CLASSIFICATION: O40 D63 H63 F24 F35