THE NEXUS BETWEEN ECONOMIC DEVELOPMENT AND INTERNATIONAL CAPITAL FLOWS IN NIGERIA FROM (1990-2022)

This study investigated "The Nexus between Economic development and international capital flows in Nigeria from 1990 to 2022, focusing on four key variables: Foreign Direct Investment (FDI), Official Development Assistance (ODA), Exchange Rate (EXR), and External Debt (LEXTDBT). The analysis begins with the Augmented Dickey-Fuller (ADF) test, which reveals that ODA is stationary at level, while RGDP, FDI, EXR, and LEXTDBT are stationary at first difference. This stationarity is critical for ensuring reliable regression analysis, preventing spurious results. The ARDL Bound test was employed to assess the presence of a long-run relationship among the variables. The findings show that the F-Bounds statistic (7.83) exceeds the critical values at the 5% level, leading to the rejection of the null hypothesis of no co-integration. This indicates a long-run relationship among the variables, underscoring the integral connection between international financial flows, exchange rates, external debt, and Nigeria's economic growth over time. In the short run, the ARDL model reveals dynamic interactions between these economic variables. The lagged value of RGDP presents a significant negative coefficient, suggesting a strong correction mechanism towards long-term equilibrium following any deviations. FDI shows a small but significant positive effect on RGDP, indicating a modest contribution to economic growth in the short run. However, FDI's immediate impact is negative, suggesting that initial adjustments may temporarily reduce growth before positive effects become evident. The impact of ODA on RGDP is slightly negative in both the short and long run, though the effect is minimal. The exchange rate presents a more complex relationship, with a significant positive impact in the long term but a negative effect in the short term. This suggests that while a favorable exchange rate supports growth, short-term fluctuations can destabilize the economy. External debt also negatively impactsxiii ROOP in the short term, highlighting its potential burden on economic growth, although its longterm effect is insignificant. The long-run ARDL model confirms a stable relationship between RGDP and the other variables. FDI continues to show a positive, albeit marginal, influence on economic growth, reinforcing its role in long-term development. In contrast, ODA and external debt are less effective growth drivers, with their impacts either negative or statistically insignificant. The exchange rate's positive long-term effect, though not significant, suggests that maintaining stability in this area could benefit sustained growth. The study's diagnostic tests affirm the model's reliability. The normality test indicates normally distributed residuals, and the absence of serial correlations supported by the DurbinWatson statistic and the Breusch-Godfrey Serial Correlation LM Test. The Breusch-Pagan-Godfrey heteroskedasticity test confirms that the model is homoscedastic, with a constant variance of error terms. In conclusion, the study highlights that international financial flows, particularly FDI and exchange rates, have a nuanced but significant impact on Nigeria's economic growth. FDI and a stable exchange rate can positively influence growth, while the benefits of ODA and external debt are less clear, with their effects being minimal or negative in both the short and long run. These findings emphasize the need for strategic management of these financial flows to optimize their contributions to Nigeria's economic development.