INSTITUTIONAL QUALITY AND FOREIGN CAPITAL FLOWS IN NIGERIA
Angela Obiageri Igbinedion and Joel Obayagbona, Ph.D
Volume 8 Issue 1
Abstract
The study examines the relationship between institutional quality and foreign capital flows in Nigeria for a period of twenty five (25) years (1996-2020). The cointegration econometric technique and Error Correction Model (ECM) were employed in the analysis of the data. Preliminary tests such as the unit root tests were conducted both at levels and at first difference to ascertain the stationarity status of the data. The results from the empirical analysis revealed that rule of law has significant positive relationship with foreign capital flows both at the short run and in the long run; in the short run, control of corruption has significant negative impact on foreign capital flows; political stability and government effectiveness have significant negative relationship with foreign capital flows, and the quality of regulatory system in Nigeria does not have any significant relationship with foreign capital flows both at the short run and in the long run. The study recommends among others that, Nigerian government should initiate appropriate policy that would ensure implementation of rule of law, strong democratic institutions and good governance, because they effectively facilitate and attract foreign investment and enhance capital accumulation. Weak democratic and institutional structures (where rule of law are not strictly observed) discourages foreign capital flows. Therefore, for Nigerian economy to continue to attract huge foreign capital flows that will enable her guarantee sustainable growth, strict adherence to rule of law by all a sundry and government readiness to implement same is very imperative. Keywords: Institutional Quality, Foreign Capital Flows, FDI, FPI, Econometric and Statistical Methods.
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