This study adopts time series data sourced through secondary sourced from institutions like the Central Bank of Nigeria (CBN), Federal Office of Statistics (FOS), World Bank Statistical Information, World Debt Tables, IMF International Financial Statistics and other sources of already processed data that are relevant to the study.
The summary of short-run relationship among the variables in each model using ordinary least square (OLS) technique of multiple regression analysis is presented below. From the above OLS results, it could be seen that Model 1 has its constant parameter (B0) negatively related to financial sector contribution to Gross Domestic Product (GDPfin) while FDI is positive. The constant parameter (B0) and the explanatory variable (MRKCAP) are positively related to inflow of FDI to financial sector (FDIfin) in Model 2. In model 3, MRKCAP, and EXTR are positively related to FDIfin while GDP, EXDEBT, INF, ECHR and DOP are negatively related to FDIfin.
In model 1, the constant parameter (B0) is negatively related to GDPfin which indicates that if the explanatory variable is held constant, GDPfin will reduce by 0.642233. However, FDI is positively related to GDPfin in consonance with the apriori expectation. This means that an increase in FDI will increase GDPfin by 0.987265. The result of model 2 shows that MRKCAP is positively related to FDIfin with about 0.383842 in conformity with the stated apriori expectation. This means that an increase in MRKCAP will increase FDIfin by 0.383842. Model 3 shows that the constant parameter (B0), MRKCAP, and EXTR are positively related to FDIfin while GDP, EXDEBT, INF, ECHR, and DOP are negatively related to FDIfin. The coefficient of MRKCAP and EXTR are 0.563703 and 0.004598 respectively. This shows that an increase in MRKCAP and EXTR will increase FDIfin by 0.563703 and 0.004598 respectively. Furthermore, the coefficient of GDP, EXDEBT, INF, ECHR, and DOP are negative -0.059259, -0.019626, -0.262509, -0.185921, -0.307012. It shows that an increase in GDP, EXDEBT, INF, ECHR, and DOP will reduce FDIfin by 0.059259, 0.019626, 0.262509, 0.185921 and 0.307012 respectively. Model 4 shows that a positive relationship exists between MRKCAP and FDI as the coefficient of FDI stands at 1.704968. This shows that an increase in FDI increases MRKCAP by 1.704968. However, the constant parameter (B0) is negatively related to MRKCAP. in detail
The coefficient of multiple determinations (R2) measures the goodness of fit. The (R2) in Models 1, 2, 3 and 4 are 0.857, 0.811, 0.868, and 0.895. These show that a strong positive relationship exist between the variables in the respective models and that about 85.7%, 81.1%, 86.8% and 89.5% variation in the dependent variable of Models 1, 2, 3 and 4 can be explained by the explanatory variables respectively. The adjusted coefficient of determinations further confirmed the above assertions.
The tests for reliability of the parameters are done with the use of student T-distribution test under 95% confidence level. The T-tests are done on a two-tale basis which is presented in the table below.