Abstract:
This work studies the relationship between foreign private investment,capital formation and economic growth in Nigeria. One objective is to determine how foreign private investment affects capital formation in the domestic economy and the other objective is to estimate the impact of capital formation and foreign private investment on economic growth in Nigeria. In order to achieve these objectives, we estimated the model of capital formation and economic growth for Nigeria. We found, though not surprisingly, that foreign private investment has a negative impact on capital formation in Nigeria. We also found that both foreign private investment and capital formation, in addition to other factors, significantly determine economic growth in Nigeria. The study finds the long run impact of capital formation and foreign private investment on economic growth is larger than their short-run impact. There is thus a long-run equilibrium relationship among the variables as the error correction term is significant, but the speed of adjustment is small in both models. These findings therefore have some policy implications. First policies that enhance capital formation and FPI inflow do increase economic growth. Banking systems credit to domestic economy enhances capital formation and economic growth
