Impact of Foreign Aid on the Economic Development of Nigeria: 1986 - 2016

Abstract

The study researched into the impact of Foreign Aid (FA) on the Economic Development of Nigeria since the literature is yet to reach an agreement on the role of FA in economic development. The study made use of secondary data and reviewed past works done in the area for knowledge gathering. We employed vector error correction model (VECM), after unit root test and Johansen cointegration test of the series were carried out. The study found out that foreign aid flow (FAF) in Nigeria is positively related to gross domestic product (GDP), but however insignificant. That is, it does not create impact on the economy to be felt by the people. The study recommended that government should ensure that foreign aid received are invested in productive ventures and create institutions to monitor its usage, as well block diversion to non-authorised purposes.

Keywords: Foreign Aid, Economic Development, GDP, Nigeria