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ECONOMIC GROWTH AND FDI NEXUS IN NIGERIA: A NEW EVIDENCE

Godson Umunna Nwagu, Anthony Orji, Duru Erasmus Ejike, Onyinye I. Anthony-Orji *, Nwachukwu Timiohy C, Njoku Peter C, Ifurueze Priscilla C.

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Abstract

This study examined the relationship between foreign direct investment and economic growth in Nigeria from 1981 to 2021 as well as the effects of FDI on economic growth in Nigeria. A linear model and an autoregressive distributed lag model were used for estimation. Many of the variables were stationary at the first difference I(1), whereas foreign direct investment and inflation were stationary at level I(0). This study showed that foreign direct investment, real gross domestic product, trade openness, inflation, exchange rate, and education (human capital) exhibit a long-run relationship. The results of this study also indicate that foreign direct investment affects a nation's economic growth positively and significantly. The study concludes that, the Nigerian government should develop arrangements to draw foreign direct investment to all sectors of the economy, primarily service and manufacturing. In addition to improving infrastructure and goods production, the country should also increase its educational policy and work ethic to build human capital. Furthermore, the Nigerian government should devise arrangements for attracting foreign direct investment, primarily in the service and manufacturing sectors. It should also improve its infrastructure, production of goods, and education policy to increase its human capital stock.

 Keywords: Foreign Direct Investment, Economic growth, ARDL

JEL Classification: F35, O40, O47