CAPITAL INFLOWS, FINANCIAL DEVELOPMENT AND GROWTH IN ECOWAS COUNTRIES: A NEW EMPIRICAL INSIGHT

This paper empirically investigated the impact of foreign capital inflows and financial development on economic growth in ECOWAS countries. The study made use of quarterly data series from 2000 to 2017 for the analysis. Adopting the panel fixed-effect regression, the empirical results showed that Foreign Direct Investment (FDI), net domestic credit (CRE), Gross Capital Formation (GCF), and Foreign Aid (AID) increase economic growth in ECOWAS region while labour force (LF) and Trade Openness (OPEN) revealed otherwise. The study therefore recommended that concerned policy makers in the ECOWAS region should pursue financial deepening and strengthen policies that will enhance the operations of the financial system. Also member countries should create a conducive socio-political and economic environment for foreign investors to invest in the economies. This can be done by reducing the corruption prevalent in the system, ethnic unrest, introduction of tax holidays, stability of policies introduced by the government, among others. In this era of Covid-19 many have lost their jobs and the economy of ECOWAS needs to be revitalized by following these economic prescriptions, among others.


INTRODUCTION
The Lagos treaty established the Economic Community of West African States (ECOWAS) on May 28, 1975 with the aim of promoting economic integration in all fields of activity of the member countries. It also had the aim to achieve "collective self-sufficiency" as a trading union through the creation of a single large trading bloc through the economic cooperation of member countries. Its member countries are Nigeria, Ghana, Cape Verde, Liberia, Benin, Guinea, Burkina Faso, Sierra Leone, Cote d'Ivoire, Senegal, The Gambia, Niger, Guinea Bissau, Togo, and Mali. In recent times, in terms of economic performance and relative to other regions of the world, Africa have shown to be the weakest. For example, in 2010, while the lower-middle income group average was US$ 2530.50, Africa's per capita GDP averaged US$ 1669, which is far below the former. Furthermore, ECOWAS countries have also had some negative experiences even as the average GDP per capita of the region in 2010 was US$669.5 effectively placing the region in the low-income group (World Bank, 2013).
From the literature, capital accumulation has been argued to be a major contributor to growth and the ECOWAS countries need to increase their capital either domestically or through foreign capital in order to support their growth agenda. Given the ever-widening mismatch between their present stock of capital and their capital requirements as well as their meagre capital budget, the only way forward to supplement this shortfall was to attract foreign capital for domestic investment. Thus, leading to the wide acknowledgement or the relative advantage(s) of foreign capital inflow as a productivity-enhancing package. Given the need to fill their savings and foreign exchange gaps, developing economies such as ECOWAS countries need a substantial inflow of capital to enhance capital accumulation and growth, and thus, help in overcoming widespread poverty in these countries (Orji, Uche, and Ilori, 2014). Increasingly, economic development literature shows that a well-designed financial system provides incentives and stimulates investment by mobilizing savings and facilitating capital inflows and fosters trade and business linkages thereby facilitating technological diffusion and improved resource use.
In the light of the above, different national authorities have been making serious efforts to attract foreign capital to their various economies. Examples of these efforts include the successful integration of African countries in large regional blocs such as the Economic Community of West African States (ECOWAS), Southern African Development Community (SADC) among others. In addition, measures such as tax holidays, accelerated depreciation allowances, signing of investment and promotional activities among others were implemented in a bid to attract foreign capital. However, in spite of these efforts, the foreign capital flow into these economies have not been very encouraging (Ajide, and Eregha 2014). Available statistics have shown that while the share of global FDI going to the developed countries maintains astoundingly high levels, the share of global FDI going to developing countries, more specifically, the sub-Saharan African (SSA) region has been meager and fluctuates consistently over time. The developed countries are the highest recipients of global foreign capital inflows in form of global FDI inflows, with almost three-quarters of total inflows going to them. They had a percentage share of 71.6% in 1970, which rose to 86.36% in 1980 and only declined to 83.05 in 1990 and has been declining steadily to reach a 54.62%. The developing countries share excluding Africa, on the other hand, was 17.82% in 1970, which declined to 12.64% in 1980 but rose to a peak of 41.67% in 1982 and with fluctuations in the flow, it was 40.33% in 2015. About the same period, the share of African countries in global FDI was drastically low in comparison to other regions of the world. The percentage share, which stood at 9. 55% in 197055% in and declined to 0.73% in 198055% in , rose to 1.39% in 199055% in and declined to 0.71% in 200055% in . From 2001, it has maintained an average of 3.27% up to 2015 (IMF, International Financial Statistics, 2017).
Researchers argue that financial development can be a driving force in economic growth through increased access to the global economy. Following the McKinnon-Shaw (1973), which argued that financial liberalization, which leads to financial development is supposed to foster economic growth through increasing savings and encouraging investments especially in developing economies. The McKinnon-Shaw thesis gained a lot of attention following the directive of the Washington Consensus and the Bretton Woods Institutions that led to many developing economies liberalizing their financial sectors. In addition, the International Monetary Fund (IMF), and the World Bank included it in their economic policy prescription package by developing a programme called "Structural Adjustment Programme" which was aimed at liberalizing distressed economies. Following this, most ECOWAS member countries liberalized their economies in the 1980s. The financial liberalization of the ECOWAS member countries enabled them to be able to compete globally with others both as distinct economies and as a regional economic group. The various ECOWAS member countries adopted and implemented this package in varying approaches with respect to their initial conditions in both the financial sector and the real sector, speed of its sequencing, and their credit markets. For instance, the reform in Ghana involved establishment of agencies tasked with the replacement of nonperforming loans with central bank bonds in its banks. Nigeria's reform involved the establishment of deposit insurance schemes explicitly charged with the role of insuring deposits in case of a bank failure (Soyibo, Aryeetey, Inanga & Ajakaiye, 1996). However, there were points of convergence such as the objective of strengthening the existing supervisory and regulatory framework of the financial sector in each member country and even in sub-regions of ECOWAS, which led to the establishment of BCEAO (Banque Centrale des Etats de l'Afrique de l'Quest) and WAMZ (West African Monetary Zone).
ECOWAS francophone countries in a bid to consolidate its monetary policies and facilitate monetary integration established L'Union Economique ET Monetaire Ouest Africaine (UEMOA) in 1994 with the creation of a regional central bank, BCEAO (Banque Centrale des Etats de l'Afrique de l'Quest). The second monetary zone within ECOWAS was the West African Monetary Zone (WAMZ) established in 2000 by The Gambia, Nigeria, Ghana, Sierra Leone, Guinea, and Liberia with the objectives of facilitating the monetary integration of the sub-region through sound management of the economies and the establishment of a single currency for these countries. With the introduction of WAMZ saw the dismantling of the capital inflows restrictions and controls within the sub-region all in a bid to attract foreign capital inflow. However, these efforts seem not to yield much result, as there has been an established pattern of inflows into the sub-Saharan African economies. The South African economy takes the bulk of the capital inflows with the rest of the economies sharing the rest of the capital inflows. Even so, the ECOWAS region receives just on the average 3.20% of the capital inflow with Nigeria taking the bulk of it.
It is discomforting that Africa has not attracted adequate amount of foreign capital that will boost her to the path of economic development despite the attendant benefits of the foreign capital that accrues to the host economy.    1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007  This decrease can be attributed to a number of factors, which include high cost of production due to poor infrastructure in the ECOWAS economies. Most ECOWAS countries face epileptic power supply leading to the usage of alternative power supply especially generators, poor road network among others. Nigeria, the largest economy in ECOWAS has the highest cost of production in the world, which has led to the relocation or outright closure of numerous multinationals out of the country (Musibau, Mahmood & Agboola, 2017). In fact, looking at the depressing state of the economies, Musibau, Mahmood & Agboola (2017) suggested that the behavioural pattern of residents in ECOWAS countries towards spending is still very strong and high, thus creating a major internal advantage for the continual attraction of FDI into the economies. Second, political instability has also negatively affected the inflow of FDI into some ECOWAS countries. For instance, Liberia was once the second biggest attractor of FDI into the region following Nigeria, but due to the prolonged civil war in the country, its FDI inflow has decreased greatly. She even experienced a negative FDI inflow in 1996. Nigeria, due to the socio-political crisis ranging from Boko-Haram in the Northern region to Militants in the Southern region which became more prominent from the late 2000's, the FDI inflow experienced a sharp drop, though not entirely attributed to the crisis, but some companies relocated from the country due to destruction and vandalization of their infrastructure. Third, most ECOWAS economies experience high level of corruption. According to CPI 2016, apart from Ghana, which is the least corrupt nation in ECOWAS followed by Mali and Togo, all the other ECOWAS countries are very corrupt. The high level of corruption in the institutions have discouraged the inflow of FDI into the ECOWAS economies. In addition to this, is investors' poor perception of ECOWAS and its member countries (Ceesay, 2011). The perception of the international community, and invariably, the foreign investors' perception on the economic and political environment is a major influence on whether they invest in the economies or not. Most ECOWAS countries have a history of discontinuing policies at the end of a political regime and the beginning of a new one, while some ECOWAS countries still struggle with political instability. This erodes investors' confidence and create doubt as to the consistency and dependability of formulated policies and the government's ability to deliver.
From financial development theory, it has shown that there is a positive nexus between financial development, foreign capital flows, and economic growth. However, empirically, the relationship between financial development and growth has not still reached a consensus. For instance, Cho and Khatkhate (1989) while studying the financial liberalization experience of five Asian countries Sri Lanka, Indonesia, Republic of Korea, Malaysia, and Philippines suggested that financial reforms from evidence did not make any significant impact to the saving and investment activities in the liberalized economies. In another study by Sinha and Macri (2001) which studied financial development and economic growth in eight Asian countries and found the results to be inconsistent hence leading to the conclusion that there is no clear and positive impact of financial development and economic growth, thus, supporting Cho and Khatkhate (1989). However, Odhimabo (2011), while studying the relationship between financial deepening, capital flows and economic growth in Tanzania using a trivariate model, reached a conclusion that financial development in Tanzania follows growth. This was supported by Orji, Uche, and Ilori (2014), which when discussing foreign capital inflows and economic growth in the WAMZ region, found out that foreign inflows had positive impact on most of the WAMZ member-countries excluding Guinea. Furthermore, Agbélénko and Kibet (2015), also found supporting evidence for financial development positive contribution to economic growth in ECOWAS region. Given the above, studies on ECOWAS countries reveal that financial development leads to economic growth but there are not enough literature on foreign capital inflows, financial development, and economic growth nexus in the ECOWAS region.
Hence, this study focuses on estimating the impact of foreign capital inflows and financial development on economic growth in ECOWAS countries. The data sources are CBN Statistical Bulletin (Various Issues), World Bank Development Indicators (2017), International Financial Statistics (IFS) and United Nations Conference on Trade and Development (UNCTAD) data (2017). The rest of the paper is structured as follows; section 2 dwells on the literature review, while the methodology is presented in section 3. Section 4 contains the results and discussion, while section 5 concludes the paper and make some relevant policy recommendations.

REVIEW OF EMPIRICAL LITERATURE
We can see from the background of the study, that Africa receives one of the lowest share of foreign capital investment. The reason for this could be due to an under-developed financial sector. Many studies have attempted to uncover the effect foreign capital has on economic growth in individual ECOWAS member-countries. Some studies have attempted have attempted to look at foreign capital inflows and economic growth, while few studies looked at how financial development has affected the growth in the ECOWAS region as a whole. A few of the studies however, try to look at the impact of foreign capital development and financial development on economic growth.
Adofu (2010), while examining the impact Foreign Direct Investment has on economic growth in Nigeria using OLS estimation technique, concluded that FDI though insignificant performed a crucial role in improving economic growth in Nigeria. He posited that the government should create an enabling socio-economic environment for it to thrive. While Nkoro & Furo (2012) in studying the impact and the nature of causality of foreign capital inflows on economic growth in Nigeria found a causal relationship running from foreign capital inflows to growth. In addition, among all foreign capital variables, economic growth reacts fast only to FDI. Orji, Uche & Ilori (2014) by using the SURE technique, examined the impact of foreign capital inflows in WAMZ economies for the period 1981-2010. They discovered that while in some economies, more than one channel of inflow impact them; others just experienced a positive impact from one channel of inflow. They recommended that the WAMZ region should create an attractive and competitive economic environment for foreign investment to thrive in the region by formulating sound economic policies and strengthened institutions.
Ozekhome (2017)  Looking at literature on financial development and economic growth, Nzotta and Okereke (2009) examined the impact of financial deepening on economic development in Nigeria from the period 1986 to 2007. They maintained that a necessary condition for stimulating growth in an economy is to increase to a relatively high level, its financial deepening. They made use of secondary annual data, two stages least squares method, trend analysis and nine explanatory variables including a financial deepening index. The results showed that the Nigerian financial deepening index has been low over the years. Summarily, they maintain that an effective financial intermediation had not sustained in the financial system, especially in the area of credit allocation and the high level of monetization of the economy. They thus recommended that a restructuring of the regulatory framework should be undertaken to guarantee the presence of an excellent risk management, corporate governance, and a process that will put a stop to the systemic crisis in the system. Sulaiman, Oke, & Azeez (2012) looked at the effect financial liberalization has on the economic growth in Nigeria and discovered that financial liberalization has a growth-effect on the economy. They however recommended that the priority, before the implementation of any financial liberalization policies, should be economic stability and the strengthening of the framework guiding the financial sector. Olayiwola, Okodua & Osabuohien (2014), discussed the concept of "finance for growth" in context of emerging economies in particular, Nigeria. While comparing with other emerging economies, they discovered that while they have the similar objectives of improving the financial sector to provide key financial services, large differences still exist in the levels of efficiency. In addition, they also argued that access to financial services is the key factor to growth and not which sector supplies the funds. Adams & Agbemade (2012) examined how financial liberalization has affected the banking industry in Ghana reviewing both pre-and postliberalization periods. They discovered that the liberalization had marked positive impact on the banking sector such as emergence of new banks, increase in the intensity of competition, decreased profit margins, and loans are more accessible to the public. They however, also discovered that non-indigenous banks outperformed indigenous banks.
Karimo & Ogbonna (2017) investigated the causality between financial deepening and economic growth in Nigeria from 1970 to 2013 and discovered that it follows a supply-leading hypothesis (i.e. financial deepening leads to growth). They recommended that policy makers should focus on eliminating the barriers that hinder the growth of credit to the private sector, and formulate stabilizing policies that will raise investors' confidence in the stock market operations.
Summarily, quite a number of studies have dealt with some aspects of this study, mostly in the area of foreign capital inflows and growth (Adofu 2010, Nkoro & Furo 2012, Orji, Uche & Ilori 2014 and some in the area of causality between Financial development and growth (Olayiwola, Okodua & Osabuohien 2014, Jallohi 2011, Ndebbio 2004, Agbélénko and Kibet 2015, Esso 2010. This study is distinct on a few counts. This study will look at the Foreign Capital Inflow-Financial Development-Economic Growth linkage. Such literature as far as we know is fewer than two studies done for the ECOWAS community. Thus, it will add to the body of knowledge.

METHODOLOGY
To estimate the relationship between foreign capital inflows, financial development and growth in selected ECOWAS economies using quarterly data series spanning from 2000 to 2017 we proceed as follows; Expressing the functional relationship of the variables of interest, we have Where is a 7×1 vector of regressors ∀ = 1 ..., = 1 …, , such that = ( , , , , , , ). is a ×7 matrix of coefficients to be estimated.
Where CRE is net domestic credit to the private sector in an economy, which is the sum of the net domestic credit in an economy following Adeniyi (2012). It is used to view the level of financial development in an economy. The higher the domestic credit, the higher the financial development in the economy and thus leads to growth. LF is the labour force, which is proxied by the total labour force following Eze, Abrokwa and Okoro (2016). This shows the working class population of the economy. An increase in the labour force should increase economy growth as it means that more resources are available for use in production. FDI is the foreign direct investment, which shows the net capital inflows used for investment in the host country. FDI according to theory is to exhibit a positive relationship with economic growth and with financial development. As an increase in FDI, inflows should lead to increased investment and a sound financial system can attract more inflows, all which leads to growth in the host country. Mahawaiya (2011) suggests that it has a priori positive influence on growth. GCF is the gross domestic investment, proxied by the Gross Capital Formation. This refers to the present stock of capital or investment in an economy. Increase in the GDI should increase the performance of the economy as it shows that the capital stock is growing. Mahawaiya (2011) suggests that it has a priori positive influence on growth. AID is foreign aid proxied by the Net official development assistance and net official aid following Orji, Uche and Ilori (2014). This should exhibit a positive relationship with economic growth as it adds to the stock of capital. OPEN is trade openness and it shows the amount of trade carried out by an economy with others. It is the value of exports plus imports as a ratio of the GDP. Often times it relates positively with GDP and growth and with financial sector development, as it will lead to more trade. This follows the work done by Ozekhome (2017). ECG is the Economic activity proxied by GDP per capita and it shows the economic performance of an economy over a period, usually a year. Positive economic growth has been often been used as an indicator for soundness in a system or economy.
We then introduce an idiosyncratic error term in order to accommodate for factors that affect the regressand.
Where is the matrix of all regressors, is the vector of coefficients and is the error term Taking the natural log of 3.2 to linearize the function and express in a panel model form, in matrix form, we get: Further, we introduce in 3.3 the panel individual-specific fixed effect and the time effects as follows thus: Where is a constant.

Data
In this study, the data on the variables of interest were sourced from World Bank Development Indicators (2017)  The unit root tests show that the variables are integrated of both order zero and order one.  Legend: * p<0.01; **p<0.05; ***p<0.001 Table 2 shows the results for fixed effects panel regression and random effects panel regression.

Panel Data Fixed Effects Model Results
In both regressions, all estimates excluding LLF in the fixed effects model and the constant in the random effects estimates are all significant at least 5% significance. However, given that the results do not have robust standard errors, we will only look at the relationship of the variables with respect to a priori expectations. Domestic Credit (LCRE) showed a positive relationship with economic growth in both estimates. This is consistent with a priori expectation that higher credit will lead to higher investment, which will boost the economy. This supports Jalloh (2011), who argues that increase in domestic credit will increase economic activities through increased investment. Foreign Direct Investment (LFDI) also showed a positive relationship with economic growth. This is also in line with theory as it shows that FDI does not crowd out domestic investment, it however complements the already available capital and thus leads to more accumulation of capital that will engender growth. This is consistent with studies such as Orji, Uche and Ilori (2014) and Eze, Abrokwa and Okolo (2016) in their study of the WAMZ region.
Although studies such as Iheonu, Ihedimma and Omenihu (2016) and Agbelenko and Kibet (2015) while studying WAEMU region argued that foreign direct inflows are detrimental to growth as they come into the economy and create unhealthy competition for domestic investment, which tends to crowd domestic investment out. Gross Capital Formation (LGCF), which is a proxy for gross domestic investment, exhibits a positive relationship with economic growth. This, in line with a priori expectation shows that increase in the present stock of capital will lead to economic growth. Labour force (LLF) participation however, shows opposing signs in the two models. It exhibits a positive relationship in the fixed effects model and a negative effect in the random effects model. A priori reasoning states that increase in the skilled labour force should engender growth. However, should it be negative, this suggests that the labour force is not adapted to meet the present needs of the society. Foreign Aid (LAID) shows positive relationship with economic growth in the both models. In line with the theoretical expectations, increase in foreign aid, which is a lowinterest/no-interest lending should lead to growth as it implies that capital invested in the country and the cost of the capital is reduced greatly, hence increasing the returns gotten from the efficient use of the capital gotten. Trade Openness (LOPEN) according to a priori expectation should exhibit a positive relationship with economic growth. In the both models, it however exhibits negative relationships. ECOWAS countries tend to import more of consumer goods more than they export, and primary goods happen to take up the bulk of their exports. Thus, a larger trade balance means that the country is either importing more or exporting more of primary goods. Moreover, neither of the above scenarios have a positive effect on economic growth. Thus, an increase in tradeopenness will inadvertently diminish economic growth.

Test Results for Individual and Time Effects
The study utilized the Hausman test, which is a test for checking the independence of the regressors and the effects, to determine if we are to use the random effects estimator or the fixed effects estimator. The null hypothesis is that the random effects estimator should be used over the fixed effects estimator (i.e. It tests the hypothesis that there should be no correlation between the variance of the two errors i.e. ( 2 , 2 ) = 0.). We reject the null hypothesis if the p-value is < 0.05. .005 Thus, we reject the null hypothesis, as the p-value is significant and conclude that the fixed effects model is to be employed.

Testing For Time-Fixed Effects
Since, we are to use the fixed effects model; we need to test to see if the dummies for all quarters are significantly equal to zero, in which the time fixed effects are not required. Its null hypothesis is that the coefficients for all years are jointly equal to zero. We reject the null hypothesis if the pvalue is less than 5%. 0.0000 Reject Ho if P<0.005 Since, P is 0.0003 < 0.05, we reject Ho and conclude that the coefficients for all quarters are not jointly equally to zero. Hence, we need to introduce time-fixed effects.

Testing For Heteroscedasticity
The study employed the Modified Wald test to test for heteroscedasticity in fixed effect regression model. It has the null hypothesis of homoscedasticity.
Decision Rule: Reject Ho if the p-value is less than 5%. 0.0000 Reject Ho Thus, we reject Ho and conclude that the data is heteroscedastic.

Testing For Contemporaneous Correlation (Cross-Sectional Dependence): Using Breusch-Pagan LM Test of Independence
Using the Breusch-Pagan LM Test of Independence, which tests for contemporaneous correlation cross entities when T>N. It null hypothesis states that residuals across entities are not correlated.
Decision Rule: Reject Ho if p-value is less than 5%. Thus, we reject the null hypothesis, and we conclude that the residuals are correlated across countries.

Robustness Check (Adjusted Results)
Using the Prais-Winsten Regression, we corrected for Heteroscedasticity and Serial Auto Correlation in model one in order to obtain standard errors that are more robust. We also included the time-fixed effects in order to observe differences in time.  Table 7 shows the results for the fixed effects panel regression adjusted for heteroscedasticity and autocorrelation. Hence, it shows robust estimates and standard errors.
Interpreting the Fixed effects model, The R 2 -adjusted is at 0.9470, which means that 94.70% of the variations in the dependent variable are explained by the regressors, while the Wald test of significance shows that the overall fitness of the model is good.
Domestic Credit (LCRE) has a positive and significant relationship on economic performance, as a percentage increase in domestic credit in the economy leads to 0.11% increase in GDP per capita. Looking at ECOWAS economies, access to affordable credit has been a challenge. An additional unit of domestic credit accessed will improve economic performance by increasing activities and investments carried out in the economy. Consistent with studies such as Orji (2012), Orji, Uche and Ilori (2014), Agbelenko and Kibet (2015), who argued that for WAMZ and WAEMU regions respectively, increases in domestic credit accessed will lead to improved economic growth in the sub-regions. A percentage increase in the foreign direct investment inflows (LFDI) leads to a 0.01% increase in economic performance in the ECOWAS region. This is partially consistent with Eze, Abrokwa & Okolo (2016), who opined that FDI positively influences economic performance in the long run, though looking at the short run, it is detrimental. Looking at this, foreign direct investment, according to theory is meant to complement domestic investment. A percentage increase in the gross capital formation (LGCF) leads to a 0.14% increase in economic growth in the region. This is in line with a priori expectation of gross domestic investment positively influencing growth. This is consistent with Mahawaiya (2011), who argued that gross domestic investment positively influences economic growth in ECOWAS and SADC regions. This means that as the country/region invests more domestically, through infrastructural development or otherwise, the economy improves by a margin of 0.14%. A percentage increase in the labour force (LLF) leads to a decrease in the economic performance by 0.26%. This sharply contrasts with a priori expectation of increases in labour force improving economic activities. This can be because the population in ECOWAS region has not been properly harnessed to maximize economic performance. This is however consistent with Eze, Abrokwa, and Okolo (2016). A percentage increase in foreign aid attracted to ECOWAS economies will increase economic growth by approximately 0.03%. This shows that a percentage increase in aid attracted into ECOWAS economies will positively influence economic performance. However, the effect less than expected, which can be due to the stringent requirements required by the donor agencies before the aid can be given. Trade openness according to a priori expectation should booster economic performance and this is supported by Mahawaiya (2011) and Eze, Abrokwa, and Okolo (2016). However, the results show that a percentage increase in trade openness will lead to a 0.03% decrease in economic performance. However, this can be because of the negative net exports that is characteristic of ECOWAS countries. Thus, a larger trade balance means that the country is either importing more or exporting more of primary goods. Moreover, neither of the above scenarios have a positive effect on economic growth. Looking at Agbelenko and Kibet (2015) who argued in favour of a detrimental relationship between trade openness and growth. They are of the opinion that increase in trade openness would attract foreign multinationals creating competition for domestic investors and eventually crowding them out. Thus, an increase in trade-openness will inadvertently diminish economic growth. It has a significant constant intercept of 2.849 units.
Interpreting the Time-Fixed Effects Model, The R 2 -adjusted is at 0.9988, which means that 96.88% of the variations in the dependent variable can be explained by the regressors, while the Wald test of significance shows that the overall fitness of the model is good.
Domestic Credit (LCRE) has a positive and significant relationship on economic performance, as a percentage increase in domestic credit in the economy leads to approximately 0.14% increase in GDP per capita. A percentage increase in the foreign direct investment inflows (LFDI) leads to 0.004% increase in economic performance in the ECOWAS region; however, this is not significant. A percentage increase in the gross capital formation (LGCF) leads to a 0.09% increase in the economic performance in the region. A percentage increase in the labour force (LLF) leads to a decrease in the economic performance by approximately 0.13%. This can be because the population in ECOWAS region is not being properly harnessed to maximize economic performance. A percentage increase in foreign aid attracted to ECOWAS economies will increase economic performance by approximately 0.02%. However, this is not significant. Trade openness according to a priori expectation should booster economic performance; however, the results show that a percentage increase in trade openness will lead to a 0.038% decrease in economic performance. This can be because of the negative net exports that is characteristic of ECOWAS countries. Thus, a larger trade balance means that the country is either importing more or exporting more of primary goods. Moreover, neither of the above scenarios have a positive effect on economic growth. Thus, an increase in trade-openness will inadvertently diminish economic growth. It has a significant constant intercept of 3.963 units. Looking at the time-fixed effects, virtually all the quarters are significant. This means that looking at ECOWAS region; the quarters do not have random effects, as they are significant.
From the above results we can observe that while using the time-fixed effects model, all variables were significant except Foreign Direct Investment and Foreign Aid, while in the fixed effects model all variables were significant, which means that financial development and foreign capital inflows are important to the economic performance of ECOWAS region as a whole. However, the labour force and trade openness, which according to a priori expectation is to be positively related to economic performance, are not.

1 Conclusions
This paper has empirically investigated the impact of foreign capital inflows and financial development on economic growth in the ECOWAS region. From the analysis, the study showed that financial development and foreign capital inflows leads to economic growth in the selected ECOWAS countries. This finding is partially consistent with the work of Adeniyi (2012), though he examined just Ghana Cote d'Ivoire and Nigeria. The paper therefore recommends that member countries should create a conducive socio-political and economic environment for foreign investors to invest in the economies such as a reduction in corruption prevalent in the system, ethnic unrest, introduction of tax holidays, stability of policies introduced by the government, among others.

Policy Recommendations
From the panel fixed effects regression results, we can see that domestic credit and foreign direct investment exhibits a positive and significant relationship with growth though the magnitude of impact is low. In recent times, the growth in ECOWAS member countries has been deeply fluctuating and foreign direct inflows attracted into the region has been meagre. Hence, the study recommends that; First, member countries should create a conducive socio-political and economic environment for foreign investors to invest in the economies such as a reduction in corruption prevalent in the system, ethnic unrest, introduction of tax holidays, stability of policies introduced by the government, etc. Second, there is need for creative image laundering by ECOWAS countries in order to improve the negative perceptions that foreigners have about investing in many countries in West Africa. This is very important because given that investors' perception is a major determinant of foreign capital inflows, a good investors' perception will encourage the inflow of foreign direct investment in the region. Third, caution should be exercised while attracting foreign capital inflows, as it can detrimental to economic performance. Hence, the impact of foreign inflows should be monitored closely to obtain the optimum level of capital inflows given the prevailing domestic economic environment in the region. Finally, credit to the private sector should be encouraged in all the domestic economies investigated in this study. This will enhance domestic