Osabuohien, E. S. C.
(2007)
FOREIGN CAPITAL AND AFRICA’S ECONOMIC PROGRESS:
FACTS FROM NIGERIA AND SOUTH AFRICA.
Journal of Banking and Finance, 9 (1).
pp. 24-37.
Abstract
Foreign capital inflow is usually believed as a means of supplementing domestic capital. The paper examined the influence of foreign capital on Africa’s economic progress focusing on Nigeria and South Africa (1970-2004). Data sourced from IFS, CBN and others were analyzed with econometric techniques. Empirical facts from cointegration and Granger casualty tests are as follows: There is a long-run relationship between foreign capital and economic progress in South Africa but in Nigeria it is short-run oriented; Foreign capital Granger-causes economic progress in South Africa, while in Nigeria casualty runs on the reverse; a bi-directional causality exists between economic progress and domestic capital in South Africa, for Nigeria it is uni-directional running from domestic capital to economic progress; Labour force in both countries Granger-causes their economic progress. In the light of the above, foreign capital should be promoted in South Africa to enhance her economic progress while in Nigeria polices that can reduce the level of capital flight (e.g. dependable institutional framework etc) are essential for foreign capital to have long-run influence on her economic progress. The need for the countries to rely more on domestic capital is equally suggested as viable factors for their economic progress.
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