Foreign Direct Investment and Economic Growth in Nigeria

Abstract

As a vehicle for transferring capital, advanced technologies, and managerial expertise, foreign
direct investment fosters industrialization, job creation, and productivity growth, which are
essential for economic transformation. However, despite the fact that Nigeria remains one of the
major recipients of FDI in African, but the investment environment together with its level of
industrialization discourage FDI and trade flows outside the oil. The study therefore, examined
the impact of foreign direct investment on economic growth in Nigeria within the period of
1980-2022. The econometric technique adopted to achieve this objective were unit root and
Vector Error Correction Mechanism (VECM), in which Foreign Direct Investment (FDI),
Foreign Remittance (FRT), Portfolio Investment (PFV) and Exchange Rate (EXR) were
regressed on gross domestic product (GDP) using annual time series data from CBN statistical
bulletin. The result of unit root test revealed that all variables were stationary at first difference
and long run relationship among the variables was also found. The results of the VECM model
indicated that foreign direct investment, portfolio investment and foreign remittance had positive
and significant effect on gross domestic product in Nigeria, while exchange rate had negative
and significant impact on gross domestic product in Nigeria. Based on the findings above, the
researchers recommend that security at all levels in the country should be overhauled in order to
boost foreign investors’ confidence as instability in any nation scare away prospective investor.