Assessing the Impact of Foreign Aid on Economic Growth in Nigeria

Abstract

This study explores the relationship between Official Development Assistance (ODA) and economic growth in Nigeria, operationally defined by GDP per capita, from 1977 to 2022. The study employs two statistical tests: Linear Regression T-Test and Partial Correlation Analysis to assess the direct impact of ODA on GDP per capita while controlling for factors such as inflation, exports, imports, Foreign Direct Investment (FDI), and population. The findings reveal that while the initial linear regression indicates a positive correlation with a statistically significant p-value, the partial correlation analysis shows no significant relationship between ODA and GDP per capita when accounting for other variables. The study concludes that foreign aid alone is insufficient for long-term economic development in Nigeria. This research distinguishes itself from prior studies by utilizing more recent data from the World Bank, while much of the existing literature relies on outdated data, often from Nigerian government sources. Nevertheless, the results align with prior studies, suggesting that aid often fails to foster sustainable growth, due to mismanagement, weak institutions, and socio-political instability. For future research, advanced models that incorporate social and political variables may produce results that more accurately explains the complexity of Nigeria’s economic situation.