Globalization And Capital Flows: Cases of Nigeria And Ghana

Abstract This study aimed at examining the effect of globalization on capital flows (capital inflows and capital outflows) in Nigeria and Ghana for the period 1981 to 2019. Secondary data obtained from the World Bank Development Indicators was used to examine this effect. The ADF unit root test was used to test for stationarity of the variables and the result indicated that all variables are stationary at first difference in both countries. The Johansen co-integration test revealed that co-integration exists among the variables in all models used in this study. In Nigeria, the result of the error correction model indicated that globalization has a negative relationship with capital inflows in the current period while the relationship is positive and significant in the first lag. In Ghana, the result of the error correction model indicated that globalization has a positive and significant relationship with capital inflows in both the current period and the first lag. For the effect of globalisation on capital outflows, the error correction result showed that globalization has a positive and significant relationship with capital outflows in Nigeria in both the first lag and the current year. In Ghana however, globalization has a positive relationship with capital outflows in the current period but in the first lag, the relationship is negative and significant. It was then recommended that the issue of insecurity and policy inconsistency so as to allow the free flow of capital into both countries should be looked into. Also, the Nigerian and Ghanaian government should undertake policy measures and reforms that will help in providing sound macroeconomic policies which will create a more stable and conducive environment for investment. Finally, there should be an intensification of government efforts in its anti-corruption campaign as this will improve the country’s image and attract inflow of funds from abroad for investment purposes in both countries.