Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience

Henry Onyebuchi Ejelonu; Stanley Osinachi Okafor

doi:doi:10.11648/j.ijafrm.20220704.11

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Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience

Henry Onyebuchi Ejelonu, Stanley Osinachi Okafor

Published in International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 4)

Received: 22 June 2022 Accepted: 8 July 2022 Published: 28 October 2022

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Abstract

As the world jostle for improved manufacturing and industrial technologies, third world countries in Africa, especially Nigeria still battles with the use of primitive tools in a technologically advancing world. This industrial bias in the country has led to abject poverty among the citizens, coupled with increasing tendencies of starvation, terrorism, banditry, kidnapping and youth unemployment being at 33% for the first quota of the year. To ameliorate this deficiencies and increase manufacturing sector performance in the economy, the government strives to achieve more foreign capital inflows in other to supplement the local production capacity. This study therefore aims to re-validate the implications this inflow has on local manufacturing sector in the country by re-assessing the implications of foreign capital inflows on manufacturing sector in third world countries: A Nigerian experience. Objectively the study is situated to examine the nexus between foreign portfolio investment, foreign direct investment and foreign development assistance with manufacturing sector productivity from 1981 to 2019, with statistical evidence obtained from central bank of Nigeria annual financial report for the year 2020. The study regressed for statistical stationarity of the variables using Augmented dickey and fuller test criterion, johansen test for cointegration to establish the nature of relationship between the parameter estimate in the model. Multiple regression analysis was carried out to substantiate the individual implications of the regressors on the regressed. Furthermore, the outcome of empirical evaluation is indicative of the existence of a short run relationship among the variables. It was likewise obtained that foreign direct investment (FDI) and exchange rate (EXCHR) were additively related to manufacturing sector productivity in Nigeria, while foreign portfolio investment (FPI) and interest rate (INTR) witnessed relative negative association ship with manufacturing productivity (MANU), which implies that a percent increase in the volume of foreign portfolio investment would equate 2.50% decline in local manufacturing capacity. The study recommended the adoption of endogenous growth model in Nigeria, while concluding based on theorization and argument against foreign capital inflows on its negative crowding out effect, it exerts on local industries in the country, that to achieve growth in the manufacturing sector, the country must evolve and begin a gradual industrial transition from primitive tools to the use of more advanced machines.

Published in	International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 4)
DOI	10.11648/j.ijafrm.20220704.11
Page(s)	140-149
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Manufacturing Sectors, Umuahia, Nigeria

References

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[2]	Adejumo's (2013). Empirical Analysis of Trade Opennes, Capital Formation, FDI, and Economic Growth: Nigeria Experience. The International Journal of Social Sciences and Humanities Invention; 1 (01): 36-50.
[3]	Akanyo, B. A. and Ajie, H. A. (2019). Impact of capital flows on the Nigerian economy in a liberalized environment, 1981-2016. International Journal of Business and Finance, vol 3, pp. 6-18.
[4]	Akinlo, A. E. (2014). “Foreign direct investment and growth in Nigeria: An empirical investigation”. Journal of Policy Modeling, 26: 627-639. http://dx.doi.org/10.1016/j.jpolmod.2004.04.011
[5]	Asiedu (2017): Foreign direct investment in Africa; In Financing Pro-Poor Growth: AERC Senior Policy vi, Kampla Uganda, 2-4.
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[7]	Dipak and Ata (2019). Impact of Capital Flows on Economic Growth in Nigeria. International Journal of Economic Management Sciences, 3, 125. Publication.
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[9]	Ekienabor E, Aguwamba S, Liman N (2019). Foreign direct investment and its effect on the engineering and surveying, University of Southern Queensland, West Street, Toowoomba, 4350, Australia. Proceedings of IMechE, Part B: Journal International journal of management and economics, 53 (1), 47–64. https://doi.org/10.1515/ijme-2017-0004
[10]	Lapova and Szirmai, (2018). Foreign direct investment in Africa: the role of natural resources, market size, government policy; institution and political; International journal of management studies (ijms), 16 (2), 177–197. retrieved from http://repo.uum.edu.my/577/1/hussin_abdullah.pdf
[11]	Bernstein and Molinen (2021). Aid and Growth in Sub-Saharan Africa: Accounting for Transmission Mechanisms. Journal International Development 17: 1055-1075.
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[14]	Obwona, (2019).. An Investigation of the Impact of Foreign Direct Investment on Economic Growth: A Case Study of Mauritania, International Journal of Economic Management Sciences, 4, 224. Publication.
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[16]	Olokoyo, (2021). The Impact of FDI on the Nigerian Economy. Economic Research, 26 (2), 51–68. https://doi.org/10.1080/1331677X.2013.11517606
[17]	UNCTAD. (2016). World Investment Deport Geneva. Review of Foreign Investment Union Countries? Journal of International Global Economic Studies, 8, 21–50. United Nations Conference on Trade and development (UNCTAD) (1999). UNCTAD World United Nations Conference on Trade and Development (UNCTAD) (2007). UNCTAD World www.vetiva.com. Accessed 05/5/2014.

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Henry Onyebuchi Ejelonu, Stanley Osinachi Okafor. (2022). Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience. International Journal of Accounting, Finance and Risk Management, 7(4), 140-149. https://doi.org/10.11648/j.ijafrm.20220704.11

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Henry Onyebuchi Ejelonu; Stanley Osinachi Okafor. Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience. Int. J. Account. Finance Risk Manag. 2022, 7(4), 140-149. doi: 10.11648/j.ijafrm.20220704.11

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AMA Style

Henry Onyebuchi Ejelonu, Stanley Osinachi Okafor. Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience. Int J Account Finance Risk Manag. 2022;7(4):140-149. doi: 10.11648/j.ijafrm.20220704.11

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@article{10.11648/j.ijafrm.20220704.11,
  author = {Henry Onyebuchi Ejelonu and Stanley Osinachi Okafor},
  title = {Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {7},
  number = {4},
  pages = {140-149},
  doi = {10.11648/j.ijafrm.20220704.11},
  url = {https://doi.org/10.11648/j.ijafrm.20220704.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220704.11},
  abstract = {As the world jostle for improved manufacturing and industrial technologies, third world countries in Africa, especially Nigeria still battles with the use of primitive tools in a technologically advancing world. This industrial bias in the country has led to abject poverty among the citizens, coupled with increasing tendencies of starvation, terrorism, banditry, kidnapping and youth unemployment being at 33% for the first quota of the year. To ameliorate this deficiencies and increase manufacturing sector performance in the economy, the government strives to achieve more foreign capital inflows in other to supplement the local production capacity. This study therefore aims to re-validate the implications this inflow has on local manufacturing sector in the country by re-assessing the implications of foreign capital inflows on manufacturing sector in third world countries: A Nigerian experience. Objectively the study is situated to examine the nexus between foreign portfolio investment, foreign direct investment and foreign development assistance with manufacturing sector productivity from 1981 to 2019, with statistical evidence obtained from central bank of Nigeria annual financial report for the year 2020. The study regressed for statistical stationarity of the variables using Augmented dickey and fuller test criterion, johansen test for cointegration to establish the nature of relationship between the parameter estimate in the model. Multiple regression analysis was carried out to substantiate the individual implications of the regressors on the regressed. Furthermore, the outcome of empirical evaluation is indicative of the existence of a short run relationship among the variables. It was likewise obtained that foreign direct investment (FDI) and exchange rate (EXCHR) were additively related to manufacturing sector productivity in Nigeria, while foreign portfolio investment (FPI) and interest rate (INTR) witnessed relative negative association ship with manufacturing productivity (MANU), which implies that a percent increase in the volume of foreign portfolio investment would equate 2.50% decline in local manufacturing capacity. The study recommended the adoption of endogenous growth model in Nigeria, while concluding based on theorization and argument against foreign capital inflows on its negative crowding out effect, it exerts on local industries in the country, that to achieve growth in the manufacturing sector, the country must evolve and begin a gradual industrial transition from primitive tools to the use of more advanced machines.},
 year = {2022}
}

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TY  - JOUR
T1  - Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience
AU  - Henry Onyebuchi Ejelonu
AU  - Stanley Osinachi Okafor
Y1  - 2022/10/28
PY  - 2022
N1  - https://doi.org/10.11648/j.ijafrm.20220704.11
DO  - 10.11648/j.ijafrm.20220704.11
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 140
EP  - 149
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20220704.11
AB  - As the world jostle for improved manufacturing and industrial technologies, third world countries in Africa, especially Nigeria still battles with the use of primitive tools in a technologically advancing world. This industrial bias in the country has led to abject poverty among the citizens, coupled with increasing tendencies of starvation, terrorism, banditry, kidnapping and youth unemployment being at 33% for the first quota of the year. To ameliorate this deficiencies and increase manufacturing sector performance in the economy, the government strives to achieve more foreign capital inflows in other to supplement the local production capacity. This study therefore aims to re-validate the implications this inflow has on local manufacturing sector in the country by re-assessing the implications of foreign capital inflows on manufacturing sector in third world countries: A Nigerian experience. Objectively the study is situated to examine the nexus between foreign portfolio investment, foreign direct investment and foreign development assistance with manufacturing sector productivity from 1981 to 2019, with statistical evidence obtained from central bank of Nigeria annual financial report for the year 2020. The study regressed for statistical stationarity of the variables using Augmented dickey and fuller test criterion, johansen test for cointegration to establish the nature of relationship between the parameter estimate in the model. Multiple regression analysis was carried out to substantiate the individual implications of the regressors on the regressed. Furthermore, the outcome of empirical evaluation is indicative of the existence of a short run relationship among the variables. It was likewise obtained that foreign direct investment (FDI) and exchange rate (EXCHR) were additively related to manufacturing sector productivity in Nigeria, while foreign portfolio investment (FPI) and interest rate (INTR) witnessed relative negative association ship with manufacturing productivity (MANU), which implies that a percent increase in the volume of foreign portfolio investment would equate 2.50% decline in local manufacturing capacity. The study recommended the adoption of endogenous growth model in Nigeria, while concluding based on theorization and argument against foreign capital inflows on its negative crowding out effect, it exerts on local industries in the country, that to achieve growth in the manufacturing sector, the country must evolve and begin a gradual industrial transition from primitive tools to the use of more advanced machines.
VL  - 7
IS  - 4
ER  -

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Author Information

Henry Onyebuchi Ejelonu

Donmaths Consultancy, Umuahia, Nigeria
Stanley Osinachi Okafor

Donmaths Consultancy, Umuahia, Nigeria

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APA Style

Henry Onyebuchi Ejelonu, Stanley Osinachi Okafor. (2022). Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience. International Journal of Accounting, Finance and Risk Management, 7(4), 140-149. https://doi.org/10.11648/j.ijafrm.20220704.11

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ACS Style

Henry Onyebuchi Ejelonu; Stanley Osinachi Okafor. Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience. Int. J. Account. Finance Risk Manag. 2022, 7(4), 140-149. doi: 10.11648/j.ijafrm.20220704.11

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AMA Style

Henry Onyebuchi Ejelonu, Stanley Osinachi Okafor. Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience. Int J Account Finance Risk Manag. 2022;7(4):140-149. doi: 10.11648/j.ijafrm.20220704.11

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@article{10.11648/j.ijafrm.20220704.11,
  author = {Henry Onyebuchi Ejelonu and Stanley Osinachi Okafor},
  title = {Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience},
  journal = {International Journal of Accounting, Finance and Risk Management},
  volume = {7},
  number = {4},
  pages = {140-149},
  doi = {10.11648/j.ijafrm.20220704.11},
  url = {https://doi.org/10.11648/j.ijafrm.20220704.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220704.11},
  abstract = {As the world jostle for improved manufacturing and industrial technologies, third world countries in Africa, especially Nigeria still battles with the use of primitive tools in a technologically advancing world. This industrial bias in the country has led to abject poverty among the citizens, coupled with increasing tendencies of starvation, terrorism, banditry, kidnapping and youth unemployment being at 33% for the first quota of the year. To ameliorate this deficiencies and increase manufacturing sector performance in the economy, the government strives to achieve more foreign capital inflows in other to supplement the local production capacity. This study therefore aims to re-validate the implications this inflow has on local manufacturing sector in the country by re-assessing the implications of foreign capital inflows on manufacturing sector in third world countries: A Nigerian experience. Objectively the study is situated to examine the nexus between foreign portfolio investment, foreign direct investment and foreign development assistance with manufacturing sector productivity from 1981 to 2019, with statistical evidence obtained from central bank of Nigeria annual financial report for the year 2020. The study regressed for statistical stationarity of the variables using Augmented dickey and fuller test criterion, johansen test for cointegration to establish the nature of relationship between the parameter estimate in the model. Multiple regression analysis was carried out to substantiate the individual implications of the regressors on the regressed. Furthermore, the outcome of empirical evaluation is indicative of the existence of a short run relationship among the variables. It was likewise obtained that foreign direct investment (FDI) and exchange rate (EXCHR) were additively related to manufacturing sector productivity in Nigeria, while foreign portfolio investment (FPI) and interest rate (INTR) witnessed relative negative association ship with manufacturing productivity (MANU), which implies that a percent increase in the volume of foreign portfolio investment would equate 2.50% decline in local manufacturing capacity. The study recommended the adoption of endogenous growth model in Nigeria, while concluding based on theorization and argument against foreign capital inflows on its negative crowding out effect, it exerts on local industries in the country, that to achieve growth in the manufacturing sector, the country must evolve and begin a gradual industrial transition from primitive tools to the use of more advanced machines.},
 year = {2022}
}

Copy | Download

TY  - JOUR
T1  - Implications of Foreign Capital Inflows on Manufacturing Sector in Third World Countries: A Nigerian Experience
AU  - Henry Onyebuchi Ejelonu
AU  - Stanley Osinachi Okafor
Y1  - 2022/10/28
PY  - 2022
N1  - https://doi.org/10.11648/j.ijafrm.20220704.11
DO  - 10.11648/j.ijafrm.20220704.11
T2  - International Journal of Accounting, Finance and Risk Management
JF  - International Journal of Accounting, Finance and Risk Management
JO  - International Journal of Accounting, Finance and Risk Management
SP  - 140
EP  - 149
PB  - Science Publishing Group
SN  - 2578-9376
UR  - https://doi.org/10.11648/j.ijafrm.20220704.11
AB  - As the world jostle for improved manufacturing and industrial technologies, third world countries in Africa, especially Nigeria still battles with the use of primitive tools in a technologically advancing world. This industrial bias in the country has led to abject poverty among the citizens, coupled with increasing tendencies of starvation, terrorism, banditry, kidnapping and youth unemployment being at 33% for the first quota of the year. To ameliorate this deficiencies and increase manufacturing sector performance in the economy, the government strives to achieve more foreign capital inflows in other to supplement the local production capacity. This study therefore aims to re-validate the implications this inflow has on local manufacturing sector in the country by re-assessing the implications of foreign capital inflows on manufacturing sector in third world countries: A Nigerian experience. Objectively the study is situated to examine the nexus between foreign portfolio investment, foreign direct investment and foreign development assistance with manufacturing sector productivity from 1981 to 2019, with statistical evidence obtained from central bank of Nigeria annual financial report for the year 2020. The study regressed for statistical stationarity of the variables using Augmented dickey and fuller test criterion, johansen test for cointegration to establish the nature of relationship between the parameter estimate in the model. Multiple regression analysis was carried out to substantiate the individual implications of the regressors on the regressed. Furthermore, the outcome of empirical evaluation is indicative of the existence of a short run relationship among the variables. It was likewise obtained that foreign direct investment (FDI) and exchange rate (EXCHR) were additively related to manufacturing sector productivity in Nigeria, while foreign portfolio investment (FPI) and interest rate (INTR) witnessed relative negative association ship with manufacturing productivity (MANU), which implies that a percent increase in the volume of foreign portfolio investment would equate 2.50% decline in local manufacturing capacity. The study recommended the adoption of endogenous growth model in Nigeria, while concluding based on theorization and argument against foreign capital inflows on its negative crowding out effect, it exerts on local industries in the country, that to achieve growth in the manufacturing sector, the country must evolve and begin a gradual industrial transition from primitive tools to the use of more advanced machines.
VL  - 7
IS  - 4
ER  -

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