DOES STOCK MARKET DEVELOPMENT PLAY ANY ROLE IN THE EFFECT OF FDI ON ECONOMIC GROWTH IN NIGERIA? AN EMPIRICAL INVESTIGATION

The objective of the paper is to investigate whether stock market development plays any role in the effect of foreign direct investment (FDI) on economic growth in Nigeria. Using annual time series data that span the period from 1981 to 2014, and employing the fully modified ordinary least squares (FMOLS) estimation technique, the empirical evidence indicates that FDI, domestic investment and stock market development positively and significantly affect economic growth, but the effect of the interaction between stock market development and FDI on economic growth is negative and significant, indicating that the Nigerian bourse is not yet fully developed to engender positive growth effect of FDI. The study further finds that government consumption expenditure and trade openness adversely affect the growth of the country's real GDP per capita. Recommendations of the paper include efforts by the government to design and implement programmes and policies aimed at enhancing the attractiveness of the country to foreign and local investors, efforts by capital market regulators to enhance stock market efficiency, reduction of government consumption expenditures and import control.