Effect of Foreign Direct Investment on Capital Market Development in Nigeria

Abstract

The aim of this paper work is to assess the effect of foreign direct investment on Capital market development in Nigeria. The study employed an Augmented Dickey- Fuller (ADF) unit root test and Johansen co-integration test to analyze the secondary data obtained from Central Bank of Nigeria statistical bulletin from 1999-2018. The absence of co-integration between foreign direct investment and market capitalization informed the resort to Ordinary Least Squares (OLS ) regression result which shows that foreign direct investment influence positively and significantly on market capitalization. Since foreign direct investment is a significant determinant. Efforts should be made by government and monetary authority to encourage foreign direct investment into Nigeria. However, given the lack of co-integration and low beta weight suggest that emphasis on foreign direct investment as a way of stimulating long run growth in the developing countries like Nigeria does not worth the while.