Foreign Capital Inflow and Human Development Index in Nigeria

Abstract

This study examined the foreign capital inflow trends and their influence on the Nigerian economy over the time frame of 1986 to 2018. Secondary data were sourced from the Central Bank of Nigeria statistical bulletin of various issues and CBN annual reports. In analyzing the long-run and short-run dynamic relationship between the human development index and selected foreign capital inflow indicator (Foreign portfolio investment), this current study utilized Johensen’s cointegration test, Error Correction Model, Granger Causality and other diagnostic tests in capturing the long-run and short-run dynamics of the variables used in the model. The result revealed the existence of a positive and insignificant long-run relationship between Foreign portfolio investment and the human development index. They concluded that since the employed variable shows great causal relevance, it can be finally estimated that if the right steps are taken, the nation could plunge itself into fostered performance by taking the right capital inflow measures. The study therefore recommended that the government should endeavor to mop the leakages in accrued FPI, to foster the influence of this resource on the nation and reverse its insignificant influence and Policy makers and financial institutions should strive to polish the capital inflows system as it greatly predicts the movement of Human Development Index through proper regulation of the foreign inflows and ensuring strict monitoring of illicit activities in the form of cybercrime