Causal and Long-Run Relationship between Foreign Capital Inflow and Domestic Savings in Nigeria

Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) November 2017 Vol. 6(7), pp 208-215

Original Research Articles

Causal and Long-Run Relationship between Foreign Capital Inflow and Domestic Savings in Nigeria

¹Dr. Eze, Onyekachi R. and ²Dr. Okparaka, Vincent C. J

¹Department of Accountancy, Banking and Finance, Ebonyi State University, Abakaliki.

²Department of Insurance and Risk Management, Enugu State University of Sciences and Technology.

Corresponding author email: ezerich2014@gmail.com

Accepted 28 December 2017

Abstract

This study examines the causal and long-run relationship between foreign capital inflow and domestic savings in Nigeria. The study employed the annual time series data from 1970 to 2014for the following variables: Domestic Savings (S), Foreign Direct Investment (FDI), Home Remittances (REM), Official Development Assistance (ODA) and Portfolio investment (PTF). Using econometric procedures, unit root test of ADF revealed that all the variables were integrated at level. Johansen Co-integration test showed the existence of long-run relationship among the variables. In testing for causality with the use of granger causality test, the results obtained indicate that there is an existence of uni-directional relationship between foreign capital inflow and domestic savings in Nigeria, meaning that foreign capital inflow causes domestic savings in Nigeria while domestic savings does not cause foreign capital inflow. The policy implication as evidenced from the results of the study is that government should endeavour to attract more remittances and FDI from international community into the country since these two variables showed positive relationship with domestic savings.

Keywords: Domestic Savings, Foreign Direct Investment, Home Remittances, Development Assistance, Long-run

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Volume 12 Issue 1 January, 2023

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