EFFECT OF CAPITAL FLOWS ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT This study examines the impact of capital flows on economic growth in Nigeria for the period 2020 to 2024, focusing on foreign direct investment, portfolio investment, and remittances as key indicators of external capital inflows. The objective is to determine the extent to which these capital flows have influenced the growth rate of gross domestic product during a period characterized by global economic disruptions, exchange rate reforms, and policy adjustments. The study adopts an ex-post facto research design and utilizes secondary data sourced from the Central Bank of Nigeria, National Bureau of Statistics, and World Bank publications. Descriptive statistics, correlation analysis, and trend analysis were employed to evaluate the relationships among the variables. The results show that Nigeria’s average gross domestic product growth rate was modest at 2.28 percent, reflecting the lingering effects of the COVID-19 pandemic and macroeconomic instability. Foreign direct investment and portfolio investment exhibited weak and statistically insignificant correlations with economic growth, while remittances demonstrated a moderate positive but insignificant relationship. The findings imply that capital inflows did not have a statistically significant effect on Nigeria’s economic growth during the study period. The study concludes that the limited impact of capital flows on growth is due to structural challenges such as policy inconsistency, infrastructural deficits, and volatility in financial markets. It recommends the implementation of stable macroeconomic policies, improved investment climate, and productive utilization of remittances to enhance the contribution of external capital inflows to sustainable economic growth.