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).