AUTHOR: NWABACHILI, IKENNA IGWEDIMMA (MSc)
DEPARTMENT: FINANCIAL MANAGEMENT TECHNOLOGY
AFFILIATION: FEDERAL UNIVERSITY OF TECHNOLOGY OWERRI
The central problem of this study was to appraise the impact of foreign direct
investment on the capital market and level of capital formation in Nigeria. While
the capital market was proxied with the volume of total market capitalization, the
volume of new issues represented the extent of capital formation in the market.
The study therefore was carried out for a period of twenty-one years, from 1983-
2003, with multiple regression model being the main statistical tool of analysis. It
was revealed from our findings that foreign direct investment exerts significant
influence on both the capital market and level of capital formation. Other major
findings include the fact that in both cases, only sectoral foreign direct
investment from the transport and communication proved to be significant even
at one percent. The non-significant nature of other explanatory variables
therefore calls for some policy recommendations. Hence, the study, among
others, recommends that for the positive effects of foreign direct investment to
be felt, care must be taken to create conducive business environment. For
instance, the fight on corrupt practices should be intensified, just as transparency
in the areas of property rights, contract enforcement, patent right and so on
should be encouraged. All these are sine-qua-non for the attraction of significant
positive investment into the economy.
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