Foreign Portfolio Investment, Investment Policy and Economic Growth in Nigeria

Abstract

The study examined the effect of investment policy of 1995 on the relationship between foreign portfolio investment and economic growth in Nigeria. This was with a view to explore the nexus between the investment policy, foreign portfolio investment and economic growth in Nigeria.Secondary data were used in this study. Annual time-series data for the period 1986 to 2013 on foreign portfolio investment and maximum lending rate were obtained from Central Bank of Nigeria (CBN) Statistical Bulletin, while data on variables such as GDP growth rate and gross domestic savings were obtained from World Development Indicators (WDI) database, published by the World Bank. Data collected were analyzed with both descriptive statistics and econometric techniques. Time series properties of the variables were examined using both Augmented Dickey Fuller and Phillip Peron tests. Cointegration properties of the variables were also examined. Vector Auto-Regressive technique supported by Variance Decomposition and Impulse Response analysis were employed to empirically determine the relationship between foreign portfolio investment and economic growth in Nigeria. The study revealed that though the investment policies of 1995 in itself had not led to economic growth but it had succeeded in attracting more foreign portfolio investment into the economic and that it aided the growth of the economy through these foreign portfolio investments.