• ISSN: 2010-023X (Print)
    • Abbreviated Title: Int. J. Trade, Economics and Financ.
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing:  ProQuest, Crossref, Electronic Journals Library , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2020 Vol.11(2): 32-38 ISSN: 2010-023X
DOI: 10.18178/ijtef.2020.11.2.662

Investigating the Effects of Foreign Direct Investments and Remittances on Economic Growth in Nigeria: A Vector Autoregressive (Var) Approach

Fagbola. O. O, Adegbite, E. O, and Oke, B. O
Abstract—In an attempt to ensure greater participation in the global economy, developing countries have increasingly liberalized, privatized and deregulated their economies since the mid-1980s. More welcoming policies to attract foreign capital inflows have been a prominent component of this trend. In this study, an attempt is made to analyze the impact of foreign direct investment and remittances inflow on economic growth of Nigeria in a quest to find a reasonable answer to the question of whether FDI and remittances inflows constitute vital sources of economic growth to Nigeria.
The study employed the Vector Autoregressive (VAR) approach. It was established that foreign direct investment has a positive but non-significant impact on Nigeria’s economic growth. However, it is evident from the outcome of the study that the remittances inflow has a negative though nonsignificant impact on Nigeria economic growth.
The policy implication of this study is that government should build an investment-friendly environment free of insecurity and corruption, reduce the cost of doing business and put in place the mechanism to attract more capital inflows to boost domestic production. By doing this, Foreign investors will have confidence in Nigeria economy and commit more funds in form of Foreign Direct Investment in Nigeria which will enhance domestic production. Remittances inflow can then be channeled to consumption of these domestic goods and services rather than on imported goods. This will increase aggregate demand and ultimately affect output and growth in Nigeria.

Index Terms—Capital inflows, foreign direct investment, remittances, capital formation, economic growth, vector autoregressive (VAR).

The authors are with the University of Lagos, Nigeria (e-mail: oluwatobi4success@gmail.com, femifunmi1981@gmail.com, okebabatunde@yahoo.co.uk).

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Cite: Fagbola. O. O, Adegbite, E. O, and Oke, B. O, "Investigating the Effects of Foreign Direct Investments and Remittances on Economic Growth in Nigeria: A Vector Autoregressive (Var) Approach," International Journal of Trade, Economics and Finance vol.11, no.2, pp. 32-38, 2020.

Copyright © 2020 by the authors. This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

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