Foreign Aid Flows and Economic Growth in Nigeria (1981 – 2016): A Bound Test Analysis

ABSTRACT: Inefficient and poor channel of foreign aid flow in Nigeria has been the bane of growth and development in the country. Therefore, the study set out to examine the impact of foreign aid flow and economic growth in Nigeria using data spanning 1981 to 2016. The study made use of ARDL cointegration and error correction model to capture the objective of the study. The results of the study revealed positive relationship between foreign aids flows and Gross Domestic Product though the relationship is insignificant. Therefore, the study concluded that there is no effective and proper utilization of foreign aids flows in the country. The study also showed negative relationship between export, exchange rate and Gross Domestic Product which implies that export and exchange rate do not enhance growth in Nigeria during the period under review. Based on these findings, this study recommends that foreign aid flows should be used more on imports of capital goods rather than imports of consumptions goods. Moreover, government should work out holistic policy measures that will make the economy more competitive and encourage stable exchange rate which will allow both local and foreign investors to expand local productivity so as to increase exportation in order to increase Nigeria foreign exchange earnings.
KEYWORDS: Foreign aid flow, exchange rate, economic growth and ARDL Cointegration analysi