Cross-Border Capital Flows and Unemployment in Nigeria: An AutoRegressive Distributive Lag Approach

From 1991–2022, this research looks at the data on cross-border capital flows in Nigeria and how it relates to unemployment. The study's data came from World Bank's World Development Indicators and the Statistical Bulletin of the Central Bank of Nigeria. The dependent variable is unemployment, while the proxies for cross-border capital flows are foreign direct investment, foreign portfolio investment, foreign remittance, external reserve, and external debt payment. Unit root tests was ensured by the Augmented Dickey Fuller method, we found that the diagnoses revealed a mixture of I(0) and I(1) integration orders; hence, we had to use the Auto-Regressive Distributive lag Model. The bound test result of the model analysis proved that cross-border capital flows do not correlate with unemployment in the long term. Consequently, additional results from the short-run regression showed that unemployment was significantly and negatively correlated with foreign direct investment and external reserves. However, the relationship between foreign portfolio investment and unemployment indicated positive but insignificant relationship in the previous year period while foreign remittance exact a positive and significant impact on unemployment in second year period. Finally, the relationship between external debt service and unemployment is reported to be positive but insignificant both in the current, previous and second year period. Hence, it was concluded that cross-border capital flows had a significant impact on unemployment in Nigeria. It is recommended amongst others that the federal ministry of trade and investment alongside the Nigerian investment promotion commission should work to streamline bureaucratic processes, ensure political stability, and strengthen legal and regulatory framework.