In the past, Nigeria had enjoyed tremendous inflow of foreign capital, making it the highest recipient among developing countries. In recent years however, total capital inflow into the country has been on the decline reducing by about 31 percent between the fourth quarter of 2016 and that of 2020. Meanwhile, unemployment continued to rise, during these periods. This study therefore, investigated the impact of foreign capital inflow on unemployment in Nigeria, using data set from the period 1986 to 2022. Specifically, the study examined the impacts foreign direct investment, foreign portfolio investment, remittances, and international trade balance exert on Nigeria’s unemployment rate. Data collected were estimated using the augmented Dickey-Fuller unit root test, and the Autoregressive Distributed Lag (ARDL) Bounds technique. The unit root test confirmed that the variables were integrated of mixed order, while the ARDL Bounds test confirmed a long run relationship among the variables. Findings from the ECM model reveal that only foreign portfolio investment contributed significantly in the reduction of unemployment in Nigeria, while others had insignificant positive impacts. The study concludes that foreign capital inflow plays a vital role in reducing unemployment in Nigeria, and thus, recommended among others; robust development of the Nigerian capital market in order to make it more viable and stable so as to boost public confidence. Secondly, the security of investors’ funds should be guaranteed via macroeconomic policies that would enhance a competitive and interest yielding business environment.
Azebi Oyeinbrakemi Innocent (Wed,) studied this question.