Foreign Direct Investment, Stock Market Performance and Economic Growth: Evidence Form Nigeria

The slow pace of economic growth in most developing economies over the years has attracted the attentions of governments of those economies to different ways of finding solutions. Among other factors, the gap between domestic savings and domestic investment has been identified as a major drag to economic prosperity in the developing economies including Nigeria. To better understand the nexus, this study investigates causal-link between amongst foreign direct investment, stock market performance and economic growth in Nigeria. Using annual series data from 1990 – 2026. Three macroeconomic variables were selected based on theoretical and empirical evidences. The study conducted pre-estimation tests such as Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests. The test results revealed that, the variables under study were properly screened for more advanced statistical regressions. The study employed Pairwise-Granger causality test in order to capture the objectives for which the study is poised to achieve. From the result, the study revealed that, there is two-way causal link amongst foreign direct investment (FDI), stock market performance proxied by market capitalization (MCAP) and economic growth proxied by GDP in Nigeria. Therefore, the study recommends that, there should be promotion of stock market development as this will lead to the flow of funds from private savings and this could be used to finance revenue generating government enterprises.