Capital Inflow and Its Dynamic Effect on Economic Development in Nigeria
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This paper examine the dynamic contribution of foreign capital inflow to the development of the Nigeria economic between the periods 1981 to 2014. This study employ error correction model, granger causality test, Cointegration test and unit root test to process the data used in the process of research. Finding reveals that all variable are stationary in the order of 1(1) integration and there exist two co-integrating equation suggesting presence of long run association among variable employed. The result of the empirical findings report that in the short run, foreign direct investment and bilateral loan immensely contribute to the development of the economy while multilateral loan and home remittance seems not to promote economic development to a large extent. The output of the error correction model validate the short run dynamics result while the causality test report unilateral nexus between bilateral loan and economic development in favour of HDI which suggest that bilateral loan has a weak contributive quadrant in stimulating economic development in Nigeria. Based on our findings, this study concluded that the contribution of capital inflow to the development of the Nigeria economy is weak and the expected level of sustainable development is not been felt to a large extent hence, the study recommends that financial discipline and moral tolerance such be embraced in order to achieve the motive of foreign inflows and hence promote economic development in Nigeria in the long run. Secondly, financial institution and Government should monitor and curtail the disparity between capital inflows and outflows through stabilization policies such as imposition of restrictive taxation and transfer rate on capitals leaving the nation and reduce to the barest minimum the cost of investment by foreign individual and institutions as this will serve as a sweetener to encourage more inflows of funds into the Nigeria economic.
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