Foreign Capital and Macroeconomic Variables: fresh evidence

The connection between foreign capital and economic growth has received greater attention in economic literature. Evidence has shown that the necessity to build economic strength by many developing countries such as Nigeria would rather require sourcing for foreign capital. But foreign investors often pay attention to the presence of certain economic variables when deciding on where appropriate to make their investment. In this connection, we analyse the impact of certain macroeconomic variables in attracting foreign capital flow into Nigeria. We represent these variables with domestic monetary policy rate, exchange rate and industrial production index using ARDL with quarterly data set spanning from 2010 to 2021. The outcome of our finding gave evidence on the significance impact of industrial production index and exchange rate in attracting capital flows into the country both in short run and long run. However, while the impact of industrial production index was positive, that of exchange rate was negative. Our finding is robust given the choice of alternative monetary policy variable. This, thus, goes to say that necessary attention must be accorded to these macroeconomic variables while making policies to attract foreign capital.