Foreign Direct Investment and Economic Growth in Nigeria

Abstract

This study examined the relationship between foreign direct investment and economic growth in Nigeria using secondary data sourced from the Central Bank of Nigeria (CBN) statistical bulletin between the periods of 1986 to 2017. The study employed Vector Error Correction Model (VECM) and Pairwise Granger Causality test to ascertain the direction of causality between variable employed. Findings revealed that of the six exogenous variables used as an indicator of foreign direct investment, only the non-oil related foreign direct investment, trade openness and market capitalization were able to pass test of hypothesis, which suggest that of the six employed independent variables, three established the fact that foreign direct investment is a vital stimuli in promoting economic performance in Nigeria with more emphasis on the non-oil related foreign direct investment. The study thus concluded that non-oil related foreign direct investment is more helpful to Nigeria’s economy compared to oil related foreign direct investment inflows. Consequently, it is recommended that both Nigeria’s private and public sectors should intensify efforts to attract further foreign direct investment inflows into the non-oil related sectors of the economy, while relatively de-emphasizing attraction of inflows into the oil related sector in the interest of the country.