Influence of Foreign Portfolio Investment in Equities on Inclusive Growth in Nigeria: An Autoregressive Distributed Lag Model Approach
DOI:
https://doi.org/10.64348/zije.2026412Keywords:
Foreign Portfolio Investment, Equities, Inclusive Growth, NigeriaAbstract
The expansion of the capital market in Nigeria has faced significant challenges that impede its role in fostering inclusive growth. Despite various reforms and initiatives aimed at strengthening the capital market, the value of foreign portfolio investment in equities has not significantly translated into improving inclusive growth in Nigeria. This study examined the effect of foreign portfolio investment in equities on inclusive growth in Nigeria from 1986-2024. The variables employed were inclusive growth (dependent variable), value of foreign portfolio investment in equities (dependent variable), and interest rate and exchange rate (control variables). Data were obtained from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and World Development Indicators (WDI). The study utilized ex post facto quantitative research design. Augmented Dickey-Fuller (ADF) and Phillip Pearons (PP) unit root tests were conducted and the results established a mixed-order of integration (order (0) and (I) and hence the use of Autoregressive Distributed Lag (ARDL) model. The estimated ARDL results showed that the value of foreign portfolio investment in equities (VFPI) had a negative (-0.001638) and statistically significant impact on inclusive growth in the short-run and likewise a negative (-5.92E-06) and statistically significant impact on inclusive growth in Nigeria. Interest rate (INTR) impacted positively (0.005107) on inclusive growth in the short-run and statistically significant but in the long-run it had a positive (0.008744) but statistically insignificant impact on inclusive growth in Nigeria. Exchange rate (EXCR) in the short-run had a positive (0.001150) and statistically significant impact on inclusive growth in Nigeria but in the long-run, EXCR had a negative (-0.005927) and statistically significant impact on inclusive growth in Nigeria. The study recommended that the Nigerian government in order to ensure that the value of foreign portfolio investment in new equities impact positively and statistically significant on inclusive growth in Nigeria instead of the negative impact revealed in the study, should be a delibrate effort driven by institutional, regulatory, and maret based actors. The federal government should provide the macroeconomic and policy envinronment, while the CBN ensures monetary and exchange rate stability. Regulatory oversights by the SEC and operational efficiency of the NGX enhance market intergrity and liquidity. Additionaly, listed firms, intermediataries, and foreign investors should be able to mobilze and sustain capital inflows.
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