FOREIGN CAPITAL

This study investigates the impact of foreign capital inflows on private sector development in Nigeria over the period 1990 to 2023. The analysis disaggregates foreign capital into four distinct components such as Foreign Portfolio Investment (FPI), Foreign Direct Investment (FDI), Foreign Aid (AID), and Remittances (REM), to examine their individual effects on domestic private sector credit as a proxy for private sector development. Utilizing the Robust Least Squares (RLS) estimation technique to address issues of model misspecification and data irregularities, the study finds that remittances exert a strong and statistically significant positive effect on private sector development, while FPI has a significant negative effect. In contrast, both FDI and foreign aid were found to have statistically insignificant impacts. The findings underscore the importance of capital quality and the domestic absorptive environment in determining the developmental impact of foreign inflows. The study concludes that while foreign capital remains essential for economic development, its effectiveness in enhancing the private sector depends critically on regulatory oversight, financial infrastructure, and macroeconomic stability. Policy recommendations include strengthening remittance channels, regulating speculative capital, and improving the investment climate for more productive FDI utilization.