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Abstract

In spite of several attempts by donors, financial institutions, government and the society at large to eradicate age-old poverty, Nigeria has walloped in generational poverty as a result of many contending factors among which mismanagement of aid and grant obtainable are leading contenders. In evaluating its objectives, this paper adopts the Augmented Dickey-Fuller test to ascertain the order of integration of the variables and Autoregressive distributed lag (ARDL) approach to account for the short run and long run dynamics of a level relationship between economic growth and foreign aid alongside relevant macroeconomic indicators. Findings reveal that there exist a long run relationship among economic growth and foreign aid to Nigeria. The paper finds out that gross capital formation significantly impacts on economic growth positively. Foreign aid exhibits a positive relationship, but it is not seen to determine economic growth in Nigeria. The study concludes that past aid to Nigeria has not been effective or it does not constitute what drives growth in the country. It also invalidates the applicability of the Two-Gap Theory squabble for Nigeria, since foreign aid is seen not to be significant.

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