Effect of Foreign Aid on Economic Development in Nigeria

Abstract

Majority of the developing countries depend on one form of assistance or the other from the developed nations to improve their general economic welfare even though it has been argued that the donor countries benefit more from this grant /loan than the recipient countries. This study therefore, examine whether foreign aid in terms of Net Bilateral disbursement of official Development Assistance (BIODA) from eight selected Donor countries have a significant effect on Economic Development (HDI) in Nigeria for the period of 2003 to 2015. The data for the study was analyzed using linear regression. The result of this study shows that foreign Aid has a significant effect on economic development in Nigeria. But however, the result on the effect of Net Bilateral Disbursement of official Development Assistance from Finland to Nigeria shows that aids from this country has no effect on HDI. Thus, it is recommended that since its impact outweighs the level of insignificance foreign aid should be enhanced in Nigeria and policies should be put in place to ensure that the benefits of these aid actually translate to general economic development.

Keywords: Foreign aid, official development assistance, human development

JEL Classification: F35, F63, H84