Impact of Foreign Direct Investment Inflow on Capital Market Development in Nigeria

Abstract

The study examines the impact of foreign direct investment on the capital market in Nigeria. Continuous growth of foreign direct investment flows into the country has led to questions how this flow of capital actually impacts the development of the capital market of the country. The main objective of this study is to determine how the inflow of tertiary FDI impacts the development of the Nigerian capital market. The research uses time series data for 39 years spanning from 1981-2019. The study employed annual tertiary FDI inflow into Nigeria as proxy for FDI while annual total value of transactions in the Nigerian capital market was used as proxy for the Nigerian capital market. Ex-post facto research design was adopted and was analysed using regression analysis with the aid of STATA 13. The results of the analysis showed that there is no statistically significant evidence of any impact of FDI inflow on the Nigerian capital market. The study concluded that the inflow of FDI does not impact on the capital market variables statistically. Therefore, the study recommended continued liberalisation of foreign investment and the industries that make up the tertiary sector of the economy in Nigeria.