This research focuses on the impact of Foreign Direct Investment and Portfolio Flows on Economic growth in Nigeria. The research covers the period between 1980 and 2018. Secondary data were collected from the Central Bank of Nigeria statistical bulletin and various issues of World Bank Publications as well as Nigerian Bureau of Statistics (NBS) The period being understudied encompasses the period of massive government efforts to attract foreign investors into the country as well as period of turbulent macroeconomic indicators such as high unemployment and low level of per capita income in Nigeria. The parsimonious Error Correction Modelling (ECM) result shows that Foreign Direct Investment, Foreign Portfolio Investment, Labour force and Gross Fixed Capital Formation have a positive and significant impact on the level of Economic Growth in Nigeria. The Johanson cointegration test result shows a long-run relationship among Foreign Direct Investment, Foreign Portfolio Investment, Labour Force, Gross Fixed Capital Formation in Nigeria. The result from the variance decomposition reveals that shocks to Foreign Direct Investment, Foreign Portfolio Investment, and Labour Force and Gross Fixed Capital formation did not explain a significant proportion of the changes in economic growth in Nigeria within the period of the study. It was recommended that government should put in place policies to encourage foreign investors to go into the agricultural and manufacturing sectors which are key to job creation and for sustainable economic growth.
Keywords: Capital Flight, co-integrating relationship, economic growth, non-stationary variables, parsimonious model.
