Economic and Financial Review


Central Bank of Nigeria


Foreign capital flows, Pull factors, Push factors, Structural Vector Autoregressive Models, SVAR


One of the utmost desire of every developing economy nurturing the aspiration of joining the league of developed nations is to pursue a course of plan that would makes it realisable. Undeniably, different channels have been identified in the economic literature as possible ways through which growth can be achieved. Attraction of foreign capital inflows has been identified of possible channel through which sustainable growth can be easily achieved. To this end. the paper empirically unravels both the pull and push factors in determining foreign capital flows, with special reference to the Nigerian economy. An empirically tractable structural VAR model is developed, and variance decomposition and impulse response analyses are used to investigate the temporal dynamic effects of shocks to both the pull and push factors on different components of foreign capital flows namely: overseas development assistance (ODA), foreign direct investment (FDI) and remittance (REM) flows. Prominently, the significant roles of shocks to domestic productivity, domestic real interest rate and foreign interest rate with their associated and magnifying impacts consistently featured across the various components as major determining factors. However, on the policy front, the paper emphasises the concomitant need for policy makers to design domestic policy that account for both external and internal shocks for real variables of the economy.

Author Bio

The author is of the Department of Economics, University of Lagos, Lagos Nigeria.

Publication Title

CBN Economic and Financial Review





Recommended Citation

Ajide, K. B. (2015). Capital flows to Nigeria: a structural VAR analysis, CBN Economic and Financial Review. 52(4), 55-78.

Included in

Economics Commons



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