IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 9 NO. 7 2024
DOI: 10.56201/ijefm.v9.no7.2024.pg80.97

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Foreign Capital Inflows and the Growth of Manufacturing Sector in Nigeria; A Theoretical and Empirical Analysis

Obah Daddy Obah, PhD, Nera Ebenezer Mansi PhD, Ofoniofoni Bobkime Sueneme

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Abstract

The study was designed to empirically examine the foreign capital inflows and the growth of manufacturing sector in Nigeria from 1986 to 2023, using time series secondary data. The study applied descriptive statistic to test if the series are normally distributed. The Jarque-Bera probability test shows that the series are normally distributed. While, we employ augmented dickey fuller and phillip-perron unit root to examine if the series are stationary. From the findings, all the variable is stationary at first difference, or I(1). As such we used Johansen Cointegration test the long run impact among the variables, the test report that there is an evidence of co-integration among variables. The study employee error correction model (ECM). The error correction result indicates that the short run disequilibrium can converge at a speed to the long run equilibrium. Hence, the study shows that foreign direct investment has a negative but significant impact on manufacturing sector contribution to gross domestic product in Nigeria. Also, it was found out that foreign portfolio investment also has a negative but significant impact on manufacturing sector gross domestic product in Nigeria. However, over the forecasting horizon it was found out that there is positive and significant impact between exchange rate and manufacturing sector contribution to gross domestic product in Nigeria. While, the coefficient of determination (R2), maintain that the explanatory factors together accounted for more than eighty seven percent of the variance in the dependent variable manufacturing sector gross domestic product. The remaining variables, however, are explained by other factors that are not part of the model. In the meantime, the model's goodness of fit is further supported by the Adjusted R2. We encourage a consistent capital flow by build the necessary infrastructure by the government. FDI promotes development, particularly in the finance indu

keywords:

Foreign Capital Inflows, Error Correction Model, Manufacturing Sector, Foreign

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