FOREIGN DIRECT INVESTMENTS AND CAPITAL MARKET DEVELOPMENT IN NIGERIA

Abstract

The study examined foreign direct investments and capital market development in Nigeria. The importance of foreign direct investments in complementing domestic savings to promote capital accumulation for economic growth, and through its feedback effect, enhance capital market development is settled in the literature. Employing the ARDL approach to analyze the short run dynamic relationships and long run stable relationships between foreign direct investments and capital market development (as proxied by market capitalization, turnover ratio and Allshare index) in Nigeria for the period 1986 to 2021, the study finds that FDIs have positive and significant impact on capital market development in Nigeria, in the long run. Furthermore, the study notes that gross capital formation serves as catalyst to FDI inflows and capital market development. The study recommends, among others, that efforts should be intensified to revamp the Nigerian economy and rejig the capital market such that the current situation where foreign investors face exchange control difficulty in the repatriation of profits genuinely made in the course of doing business in Nigeria can be avoided.