INTERNATIONAL CAPITAL FLOWS AND FINANCIAL DEREGULATION IN DEVELOPING ECONOMIES: A CASE STUDY OF NIGERIA (2007 – 2023)

Abstract

The study investigated International capital flows and financial liberalisation in developing countries; 2005 - 2021. The Specific objectives of the study are as follows; to investigate effect of Foreign Direct Investment (FDI) on Nigerian Gross Domestic Product and to examine the effect of Portfolio Investment on Nigerian Gross Domestic Product. Ex-post facto research design was employed. The study adopted ordinary least square (OLS) Regression analysis for hypothesis testing. From the analysis the result revealed that Foreign Direct Investment (FDI) has no significant effect on Real Gross Domestic Product.  This result confirms the findings (t-statistics is 1.127542 while the probability value is 0.2799). Portfolio Investment has no significant effect on Real Gross domestic Product. This result confirms the findings (t-statistics is 0.544125 while the probability value is 0.5956). However, the study recommended that it is important that the government concentrate on providing the basic infrastructures and policies that will support and encourage foreign investments in Nigeria. Exchange rate liberalization is also critical in facilitating trade in any economy, we therefore advise the policy makers to ensure that exchange rate should determine by the forces of demand and supply. To further sustain foreign portfolio investment and to achieve other macroeconomic objectives of the government such as economic growth Authorities should look for ways of strengthening the working mechanisms of the capital market especially against fraudulence to ensure the effectiveness of the policy tools in achieving the desired macroeconomic goals in the country.