THE IMPACT OF TRADE LIBERALISATION AND CORRUPTION POLICY REFORM ON CAPITAL INFLOW IN NIGERIA

Abstract

Despite the implementation of the liberalisation policy, the level of aggregate investment in the Nigerian economy seems inadequate which has necessitated the drive for foreign capital inflows. The study examined the relationship between trade liberalisation, corruption, and foreign capital inflows in Nigeria from 1990 to 2022.The study relied on annual secondary data. Data on market size, inflation rate, trade openness and capital inflows came from the 2022 statistical bulletin of the Central Bank of Nigeria. Data on population growth was obtained from the World Development Indicator, Data on corruption control were from World Governance Indicator. Corruption perception index data from Transparency International. Autoregressive Distributive Lag (ARDL) was employed. The results from the ARDL estimates showed that controlling anticorruption policy reduced the significant effect of trade liberalisation on corruption in both the short-term (ΔACP = -0.536; p=0.0163) and long-term (ACP = -1.172; p=0.0017). This was evaluated at 5% significant level. Furthermore, the results demonstrated that in the short run at 5% critical value, trade liberalisation had a significant and positive impact on corruption (ΔTLP (-2)) = 0.7076; p=0.0031) while in the long run trade liberalisation (TLP) was insignificant in influencing corruption in Nigeria. In summary, the study found that both trade liberalisation and anticorruption policies have separate effects in reducing corruption in Nigeria. However, pursuing both policies simultaneously may not be effective in reducing corruption. The study recommended that the government of Nigeria should sustain its anti-corruption policy, a better corruption perception index can attract more capital inflows into the country.