THE IMPACT OF FOREIGN DIRECT INVESTMENT ON FINANCIAL DEEPENING IN NIGERIA

Author: Patrick, Ologbenla (PhD)

ABSTRACT

The quest for economic growth and development has been the primary focus of economies worldwide, leading to the formulation of various policies and strategies. Foreign Direct Investment (FDI) is one such strategy, serving as a means to earn foreign reserves and finance capital formation, technology transfer, and trade. Nigeria has consistently been a top beneficiary of significant FDI in sub-Saharan Africa, with FDI inflows fluctuating over time. Despite the benefits of FDI, its impact on financial deepening and economic growth varies across countries and depends on factors such as absorptive capacity and the type of FDI. This study aims to examine the impact of FDI on financial deepening in Nigeria from 1980 to 2022. The research questions address the trend of FDI and financial deepening in Nigeria and the relationship between the two variables. The study will use theoretical frameworks, including the MacDougall-Kemp hypothesis and Dunning’s eclectic paradigm, to explore the role of FDI in promoting financial deepening. The findings of this research could have significant implications for policymakers, the Nigerian government, investors, and businesses. Understanding the impact of FDI on financial deepening will help inform appropriate policy measures and strategies to enhance Nigeria’s financial sector and spur economic growth. Additionally, the study contributes to the existing literature on FDI and financial deepening, providing valuable insights for future research in this area.

Keywords: Foreign Direct Investment, Financial Deepening, Nigeria

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