FOREIGN EQUITY INVESTMENT, DEBT SECURITIES, AND ECONOMIC GROWTH IN NIGERIA: AN EMPIRICAL ANALYSIS
Abstract
This study examines the relationship between foreign equity investment, debt securities, and economic growth in
Nigeria: an empirical analysis. An ex-post facto research design was adopted using data covering 1987–2024 (38
observations). Data on real gross domestic product, foreign portfolio investment, market capitalisation, interest rate, and
exchange rate were obtained from official Nigerian sources. The analysis employed unit-root tests, Johansen
cointegration analysis, and a vector error correction model (VECM) to examine long-run relationships and short-run
dynamics. The unit-root results indicated that the series were integrated of order one, while the Johansen test identified
three cointegrating relationships, suggesting a long-run association among the variables. Long-run VECM estimates
showed that market capitalisation and exchange rate had statistically significant positive relationships with real GDP,
whereas interest rate had a statistically significant negative relationship. Foreign portfolio investment had a positive but
statistically insignificant long-run coefficient. In the short run, changes in foreign portfolio investment were positively and
significantly associated with real GDP. The findings indicate that the relationship between foreign portfolio capital and
economic performance may differ between the short and long run, while domestic capital-market development and
macroeconomic conditions also matter. The study recommends strengthening capital-market institutions, maintaining
macroeconomic stability, and encouraging sustainable foreign portfolio inflows.
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Published in SALEM JOURNAL OF BUSINESS AND ECONOMY
ISSN: 627-44669
This article appears in our peer-reviewed academic journal
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