Abstract

This study investigates the effect of foreign capital inflows on the growth of the manufacturing sector in Nigeria over the 1986–2020 period. Using time series data sourced from the World Bank and Central Bank of Nigeria, the study employs the Engle-Granger two-step cointegration technique and Granger causality tests. Capital inflows are disaggregated into foreign direct investment (FDI), portfolio investment, official development assistance (ODA), and remittance inflows, while manufacturing sector growth is measured as the log of sectoral output. Results show that FDI and portfolio investment have significant positive impacts on manufacturing growth, while ODA exerts no significant effect. Granger causality tests reveal a unidirectional causal relationship from both FDI and portfolio investment to manufacturing sector growth. The study recommends that the Nigerian government enhance infrastructure and policy frameworks to attract sustainable foreign capital that can complement domestic investment in the manufacturing sector.