International Journal for Tourism and Technology (IJTT)
The study investigated foreign portfolio investment and economic growth in Nigeria from 1998-2023. The study used ex-post facto research design and the secondary data were generated from the Central Bank of Nigeria Statistical Bulletin, 2023. The study employed trade openness, total portfolio investment and exchange rate as independent variable to measure foreign portfolio investment, whereas gross domestic product was adopted as the dependent variable to measure the growth. Relevant test of Augmented Dickey-Fuller was conducted to check for the stationarity of the data, and the ARDL bound test for cointegration was carried to obtain the longrun relationship of the variables. Hypotheses were formulated and tested using ordinary least square method with the aid of E-view statistical package version 9. Findings from the ARDL shot run model reveals that trade openness has a negative and insignificant effect on the growth (GDP) of the Nigerian economy. Total portfolio investment has a negative and insignificant effect on the growth (GDP) of the Nigerian economy. Exchange rate has a negative and insignificant effect on the growth (GDP) of the Nigerian economy. The study jointly concludes that foreign portfolio investment has a significant effect on the growth of the Nigerian economy. It was recommended that, Policymakers should design frameworks that incentivize stable, long-term foreign investments rather than short-term speculative inflows. Implement measures to stabilize the exchange rate, and diversify the economy to reduce dependency on foreign investment.
Economic growth is a fundamental objective for any nation, especially developing countries like Nigeria. Economic growth is essential for improving the standard of living, reducing poverty, and fostering national development. It refers to the sustained increase in a country’s productive capacity, typically measured by the rise in real Gross Domestic Product (GDP) over time. Nigeria, being one of Africa's largest economies, has experienced fluctuating growth rates over the years due to several factors, including dependence on crude oil, policy instability, and weak infrastructure. Despite these challenges, efforts to promote growth have emphasized diversification through capital accumulation, technological advancement, and increased investment flows (World Bank, 2021). Foreign Portfolio Investment (FPI), as a significant form of external financing, has been recognized as a crucial factor in enhancing economic growth by providing liquidity to financial markets and facilitating the development of various sectors, including manufacturing, services, and agriculture (Adeniyi et al., 2022).
The term "foreign portfolio investment" describes the practice of overseas investors purchasing equities, bonds, and other securities from a domestic market. More liquid and requiring no direct control over the entities invested in, FPI differs from Foreign Direct Investment (FDI), which entails management and control of firms. Major factors that affect foreign direct investment (FDI) inflows include total portfolio investment, trade openness, and currency rate stability. Trade openness is the extent to which an economy is connected to the global market via imports and exports, whereas total portfolio investment measures the overall amount of foreign money in the form of securities in a country's financial market. However, the value of returns on overseas investments when translated back into the investor's native currency is determined by the exchange rate, which in turn impacts the relative attractiveness of investments (Obi et al., 2021).
Foreign portfolio investment, Trade openness, total portfolio investment, exchange rate