DEVELOPMENT FINANCE INSTITUTIONS AND PRIVATE SECTOR PROJECTS IN DEVELOPING COUNTRIES. A CASE STUDY OF NIGERIA
Abstract
This paper analyses how the Development Finance Institutions have
been effective in crowding in foreign and domestic private investment
in Nigeria between the year 2000-2023. The research used the
Autoregressive Distributed Lag (ARDL) bounds testing methodology to
assess the effect of DFI investment on the flow of the private capital
using the Central Bank of Nigeria, World Bank and DFI annual reports
and conditioned the effect on the macroeconomic situation and
institutional quality. Findings indicate imbalanced effects of crowding
in: DFI interventions largely crowd-in foreign but show statistically
insignificant effects on domestic privates. The growth of GDP,
institutional quality, and macroeconomic stability turn out to be
important determinants to both types of investments, whereas oil
prices and exchange rates have a disproportional influence on foreign
investment. The results indicate that although DFIs are able to attract
international investors with signaling and mitigating risk schemes, mobilizing domestic capital has to be supported by complementary
policies such as financial sector deepening, risk-sharing specific
instruments, and governance changes. The research provides empirical
information on the effectiveness of DFI in the country-specific setting
and should inform the development finance policy and operation
strategies.
This article is available as a PDF download
Published in AFRICAN JOURNAL OF ACCOUNTING, FINANCE & MARKETING
ISSN: 2805 - 4253
This article appears in our peer-reviewed academic journal
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