Globalization and capital formation in Nigeria

Abstract

No country can achieve sustained economic growth without substantial investments in capital formation. Nigeria is rich in natural resources but due to inadequate capital and technology, these resources have not been fully tapped and maximized. This study seeks to provide another gate way to unlocking the dearth of capital formation for development by specifically investigating the impact of financial and trade globalization on capital formation in Nigeria within the period 1990–2022. Autoregressive distributed lag (ARDL) technique was adopted for data analysis. The findings of this study indicate that while trade globalization has negative effect on capital formation in both the long run and short run respectively, financial globalization exerts negative effect on capital formation in the long run but a positive effect in the short run. Nevertheless, Financial and trade globalization exert detrimental effect on capital formation in the long run. A major policy recommendation is that Nigeria should play a key role in the African Continental Free Trade Area in order to boost her trade and financial competitiveness within Africa and so be able to lunch herself into the global space, and thus tap the potential benefits of trade and financial globalization.