Effect of Foreign Portfolio Investments on the Performance of Financial Sector in Nigeria

摘要

The effect of foreign portfolio investments on the performance of financial sector in Nigeria was investigated by means of the ex-post facto design. Data of foreign portfolio investments and contribution of financial sector to gross domestic product was obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank Development Indicators spanning 1981-2016. Data obtained was analysed using stationarity and unit root, co-integration, ordinary least square estimation, error correction model, and variance decomposition tests. Findings of the study showed that foreign portfolio investments significantly affect the performance of financial sector in Nigeria. On the basis of this, it was recommended the government should strengthen the financial sector, specifically the money and capital markets in order to enhance the flow of foreign portfolio investments into this sector in Nigeria. This is because foreign investors can invest on financial or liquid assets with the hope of a sound future return.