Financial Globalisation and Domestic Investment in Developing Countries: Evidence from Nigeria

Financial globalisation is hypothetically helpful to a country to the extent that capital inflows augment available domestic savings for investment purposes. This may be impossible where a globalised country finds itself experiencing more capital outflows than inflows. In this study, we identified the factors that determine the level or degree of financial globalisation of a country as the nominal exchange rate, the level of financial development as captured by the level of financial deepening of the financial system and trade. Using the Kaopen (Capital opening index) and average exchange rates measures of financial globalisation the paper found that, for Nigeria, the greater the level of financial globalisation, the more Nigeria experienced capital outflows. Export is particularly positively impactful on capital outflows. Capital outflows have depleted available domestic resources and impacted domestic investment negatively. The paper recommends the greater need for autonomous investment to crowd in other investments by implementing policies that encourage investment in the economy. This situation may not improve until there is a proactive and deliberate action from the government to improve investment, especially of infrastructure,in the econom

Investigating the Effect of Capital Inflow on Domestic Investment in Nigeria: A Vector Error Correction Model (VECM) Approach

The exact role of capital inflows enhancing domestic investment and promoting economic growth has been of great concern to policymakers and researchers taking into account the huge reliance on capital inflow in Nigeria. This study investigates the effect of capital inflow on domestic investment in Nigeria between the periods 1981 to 2016 using Vector Error Correction Model (VECM) approach. The variables used are the various components of capital inflow (foreign borrowing, foreign direct investment, portfolio investment, official development assistance and workers’ remittance) and domestic investment. The study revealed that a rise in the various components of capital inflows (foreign direct investment, portfolio investment, and official development assistance) would enhance domestic investment in the country while a rise in foreign borrowing and workers remittance would lead to decrease in domestic investment. Furthermore, the study revealed that capital inflows (portfolio investment and official development assistance) Granger cause domestic investment in the country. The study recommends that for government to close the savings and foreign exchange gap there is the need for appropriate policies to be design to determine the optimal level of capital inflow that will enhance domestic investment in the country. In addition, the government should provide adequate social amenities, infrastructural facilities, political stability and also conducive environment that is business friendly so as to attract foreign capital into the country for investment purpose. Keywords: Capital Inflow, Economic Growth, Domestic Investment, Nigeria, VECM. JEL CODE: F21, O55, P3

Dynamics of Digital Finance and Financial Inclusion Nexus in Sub-Saharan Africa

With the revolution in the financial technology space occasioned by competition among financial market intermediaries, there is no doubt that more unbanked and under-banked citizens will be captured into the financial net of the economy. This study examined the dynamic relationship between digital finance and financial inclusion in 27 sub-Saharan African countries. Granger Error Correction Method (ECM) with General Methods of Moments (GMM) of Arellanon and Bond (1991) were used to analyze the short panel data. The study found that a positive long-run relationship exists between digital finance and financial inclusion. It therefore recommends amongst others that monetary authorities of emerging and developing economies in sub-Sahara African countries should embrace digital financial technologies by encouraging commercial banks to install more ATMs and discourage acceptance of cash payment and withdrawals within established thresholds across bank counters in their respective countrie