Unpacking the Relationship between Foreign Direct Investment, Public Borrowing and Economic Development in Nigeria: New Insights and Policy Implications

Abstract

This study investigates the intricate relationships between foreign direct investment (FDI), public borrowing, and economic development in Nigeria. Using a combination of econometric techniques and time-series data spanning from 1981 to 2023, we examine the impact of FDI and public borrowing on Nigeria's economic growth and development. The results of the ARDL model technique used in analyzing the data showed that while FDI has contributed positively and significantly to Nigeria's economic development in both the long and short run, the country'sreliance on public borrowing has exacerbated its debt burden, undermining the potential benefits of FDI evidenced with its non-significance result on real GDP at both long and short run and also that Corruption weakens the impact of the development variables. It is evidenced from the results that countries ought to promote sustainable financial policies and improved government practices. The study highlights the need for policymakers to adopt a more balanced approach to economic development, such that prioritizes sustainable public finance management and human capital development. This research contributes to the ongoing debate on the role of FDI and public borrowing in promoting economic development in developing countries, particularly in Africa. The findings have important implications for policymakers, development practitioners, and scholars seeking to understand the complexities of economic development in Nigeria and beyond.