International Financing and Gross Fixed Capital Formation in Nigeria

This study examined the effect of international financing on gross fixed capital formation in Nigeria from 1983 to 2023. The study disaggregated international financing into external debt, foreign direct investment, official development assistance and remittances, while economic development was proxied by gross fixed capital formation. Annual time series data used were sourced from the World Development Indicators (WDI), the National Bureau of Statistics (NBS), and the Central Bank of Nigeria (CBN) annual Statistical Bulletin and utilized the Autoregressive Distributed Lag (ARDL) to estimate the short-run and long-run interactions among the variables. Empirical results revealed that external debt showed a positive but statistically insignificant impact on gross fixed capital formation in both the short run and long run, while foreign direct investment, official development assistance and remittances have significant positive effects on gross fixed capital formation in both the short run and long run. The study concluded that international financing plays a vital role in enhancing capital accumulation and economic development in Nigeria. It was recommended among others that government and policymakers should strengthen the institutional and governance frameworks guiding the utilisation of external debt to ensure that borrowed funds are channelled into productive, capital-enhancing projects rather than recurrent expenditure, while sustaining an enabling environment that allows foreign direct investment, official development assistance and remittances to be productively invested in physical capital formation.