Fiscal Policy and Inflow of Foreign Investment in Nigeria Financial Market
Abstract
This study examined the effects of fiscal variables on foreign investment in Nigeria. Data were sourced from Central Bank of Nigeria Statistical Bulletin from 1990-2023. Foreign investment inflow was modeled as the function of capital expenditure, recurrent expenditure, oil revenue and nonoil revenue. The study employed the Autoregressive Distributed Lag (ARDL) to determine the relationship between the variables. The result of the ADF root test on fiscal policies and tax regulation, the result shows that were stationary at order one I (1) while FI is in 1(0). The ARDL bounds test result, it is clear that there is a long run relationship amongst the variables. The estimated ARDL model found that fiscal policy variables 76.3 per cent variation in foreign investment in Nigeria, this implies that 23.7 per cent was explained by variables not capture in the model. The result of the dynamic relationship between fiscal policy variables and foreign investment found that the government expenditure and governance have positive effect on foreign investment into the country while public debt has negative effect on foreign investment. The co-integration equation has a value of -0.528710 from Nigeria with a corresponding probability value of 0.0000 which is statistically significance at 5%. From the findings, the study concludes that fiscal policy such as government expenditure determines inflow of foreign investment in Nigeria. The study recommends that Government should ensure that revenue realized is adequately allotted to the productive sector of the economy to boost inflow of foreign investment and government should ensure that the proportion of capital expenditure to recurrent expenditure is increased to ensure an increase in the level of productive investment such that economic activities will be enhanced for greater inflow of foreign investment.
Keywords
Fiscal Policy
Foreign Investment
Nigeria
Financial Market
References
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