The Economic Growth Imperative of Foreign Portfolio Investment for Nigeria

This study examined the effect of Foreign Portfolio Investment (FPI) on economic growth in Nigeria. The research design adopted was a combination of exploratory and ex post facto research designs. Secondary data were sourced from the Central Bank of Nigeria (CBN) statistical Bulletin for the period 2005 to 2014. Gross Domestic Product was used as dependent variable while Foreign Portfolio Investment, Market Capitalization as well as exchange rate for the period were the independent variables. Ordinary Least Square (OLS) multiple regression was used to analyze the data. The result indicated that Foreign Portfolio Investment (FPI) and market capitalization have positive effect on Real Gross Domestic Product (RGDP) while exchange rate had an inverse relationship with RGDP. Durbin-Watson Coefficient Test shows that there is absence of auto-correlation. Based on this result, the hull hypothesis is rejected implying that there is a positive relationship between FPI and RGDP. The result agrees with the finding made by Baghebo and Apere (2014). It was therefore recommended that since economic performance is critical to attracting Foreign Portfolio Investment into any country, the Federal Government of Nigeria should create enabling environment that will stimulate the economy and strengthen its fundamentals. The government should also work towards the stabilization of the capital and money markets by putting in place appropriate investor friendly policies to sustain their internationalization and attractiveness to investors.