EFFECT OF TRADE POLICY REGIME ON THE NEXUS BETWEEN FOREIGN CAPITAL INFLOWS ANDECONOMIC GROWTH IN NIGERIA

Abstract

In this study, an examination is conducted on the link between trade policy regime and the nexus between foreign capital inflows and economic growth in Nigeria. The study adopted Autoregressive Distributed Lag (ARDL) estimation technique and interacted trade openness and foreign capital inflows to measure Bhagwati hypothesis in the Nigerian economy. The result revealed that in the long run, export promotion plays complementary roles with both official development assistance and foreign direct investment to effect a positive and significant change in the Nigerian economy. In the short run however, both official development assistance and foreign direct investment, as well as their interactions with trade policy regime are all insignificant. The study recommended that Nigeria should continue its policy of export promotion and with low interest rate and moderately encouraging exchange rate, more of foreign direct investment and official development assistance can be attracted into Nigeria in order to attain a better economic growth.