Effect of foreign capital inflow on private sector credits: Evidence from Nigeria

Type of the article: Research ArticleAbstractThe private sector remains the engine room for inclusive economic development, and its interaction with Foreign Capital Inflows (FCIs) is crucial for growth in emerging markets like Nigeria. This study examined the impact of FCIs (Foreign Direct Investment, Foreign Portfolio Investment, Foreign Debt, Foreign Aid & Foreign Remittances) on Private Sector Credit in Nigeria. To achieve this objective, time series data spanning a 26-year period (1998–2023) were harvested and used. The Augmented Dickey-Fuller test was used to ascertain the unit root, while the hierarchical regression technique provided the model estimates. From the results, foreign remittances emerged as the only significant contributor to private sector credit growth (β = 0.993, p < 0.05). This underscores the critical role of diaspora remittances in supporting financial intermediation and private sector development. The study concluded that foreign remittance is a major driver of private sector credit expansion in Nigeria. It is recommended that policy efforts should prioritize facilitating remittance inflows through a supportive regulatory framework. Emphasis should also be placed on leveraging remittances as a stable and development-oriented source of capital.