ABSTRACT
This study examined the effects of foreign portfolio investment on financial markets performance in Nigeria. It employed time series data for the period 2009-2018 sourced from Central Bank of Nigeria (CBN) bulletin and World Bank analyzed with Error Correction Model (ECM), Ordinary least square and correlation techniques to determine whether FPI stimulate or destabilize Nigeria’s economic performance. The study found that foreign portfolio investment has over the years, significantly destabilized Nigeria’s economy; the results showed a negative impact of FPI on Nigeria’s economic performance in both the short and long-run. The study concluded that FPI poses threat to Nigeria economy, partly because of the high negative volatility associated with it and recommends that government should develop strong institutions to attract other components of foreign resources like FDI and foreign loans since FPI is more amenable to sudden withdrawing. This may help to increase the dwindling foreign reserves and augment capital formation that is imperative to resuscitating the declining performance of the economy. Keywords: Economic performance, financial market performance, foreign portfolio investment, marginal efficiency theory