Foreign Direct Investment and Economic Growth: Empirical Assessment of the Nigerian Economy (1986 – 2019)

Chinedu Maurice  Umezurike; Amalachukwu Chijindu Ananwude; Patrick Amaechi  Mbanefo

doi:10.37899/journallabisecoman.v2i6.547

Chinedu Maurice Umezurike Department of Banking and Finance, The Federal Polytechnic, P. B. M. 1012, Kaura Namoda, Zamfara State, Nigeria
Amalachukwu Chijindu Ananwude Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria
Patrick Amaechi Mbanefo Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria

DOI: https://doi.org/10.37899/journallabisecoman.v2i6.547

Keywords: Foreign Direct Investment, Economic Growth, Nigerian Economy

Abstract

The purpose of this study is to examine the impact of foreign direct investment on the growth of the Nigerian economy. The Autoregressive Distributive Lag (ARDL) technique was used to analyze data spanning the years 1986 to 2019. The preliminary findings of the ARDL suggested that foreign direct investment and economic development in Nigeria had a long-run link. According to the stated finding, foreign direct investment has a considerable positive link with the rate of real gross domestic product growth. Similarly, total exports are positively correlated with the pace of real gross domestic product growth. On the other hand, total non-oil imports and exchange rates show a considerable negative association with the pace of real GDP growth. The Granger causality test indicated that foreign direct investment inflows into Nigeria had no discernible influence on the growth rate of real gross domestic product throughout the study period. Similarly, the pace of real gross domestic product growth is not greatly impacted by the quantity of total exports, total non-oil imports, or exchange rate fluctuations. This report suggested that trade obstacles be removed, particularly those imposed by customs and port officials. Structural trade-oriented policies should be implemented to stimulate economic growth in Nigeria through increased exports in order to attract additional investors and strengthen the country's output growth rate.

References

Abbas, Q., Akbar, S., Nasir, A. S., Ullah, H. A. & Naseem, M. A. (2011). Impact of foreign direct investment on gross domestic product. Global Journal of Management and Business Research, 11(8), 35-40.

Adegboye, F. B., Ojo, J. A. & Olokoyo, F. O. (2017). Foreign direct investment and economic development in Africa. Journal of Internet Banking and Commerce, 22(1), 1-15.

Adegboye, F. B., Osabohien, R., Olokoyo, F. O., Matthew, O. & Adediran, O. (2020). Institutional quality, foreign direct investment, and economic development in Sub-Saharan Africa. Humanities and Social Sciences Communications, 1, 1-9.

Aga, A. A. K. (2014). The impact of foreign direct investment on economic growth: A case study of Turkey 1980–2012. International Journal of Economics and Finance, 6(7), 71-84.

Agrawal, G. (2015). Foreign direct investment and economic growth in BRICS economies: A panel data analysis. Journal of Economics, Business and Management, 3(4), 421-424.

Akanegbu, B. N. & Chizea, J. J. (2017). Foreign direct investment and economic growth in Nigeria: An empirical analysis. European Journal of Research in Social Sciences, 5(1), 11-20.

Akiri, S. E., Vehe, B. N. & Ijuo, O. A. (2017). Foreign direct investment and economic growth in Nigeria: An empirical investigation. International Journal of Economics and Business Management, 2(5), 55-66.

Ashraf, I., Yong, S., Afzal, R. M. & Kun, G. (2019). Empirical analysis of foreign direct investment and economic growth in Pakistan using VECM model. African Journal of Business Management, 13(16), 544-556.

Asogwa, O. F. & Manasseh, O. C. (2014). The impact of foreign direct investment on economic growth on Nigeria. Journal of Economics and Finance, 3(5), 37-45.

Awe, A. A. (2013). The impact of foreign direct investment on economic growth in Nigeria. Journal of Economics and Sustainable Development, 4(2), 122-132.

Awunyo-Vitor, D. & Sackey R. A. (2018). Agricultural sector foreign direct investment and economic growth in Ghana. Journal of Innovation and Entrepreneurship, 7(15), 1-15.

Baklouti, N. & Boujelbene, Y. (2016). Foreign direct investment-economic growth nexus. ACTA Universitatis Danubius, 12(2), 136-145.

Behname, M. (2012). Foreign direct investment and economic growth: Evidence from Southern Asia. Atlantic Review of Economics, 1(2), 1-15.

Boriçi, Y. K. & Osmani, E. (2015). Foreign direct investment and economic growth in Albania. Economics, 3(2), 27-32.

Bredino, S. & Peter, F. (2018), Foreign direct investment and economic growth in Nigeria. Journal of Economics and Business, 1(3), 260-267.

Choong, C. K. & Lim, K. P. (2009). Foreign direct investment, financial development and economic growth. The case of Malaysia. Retrieved from ssrn.com.

Danja, K. H. (2012). Foreign direct investment and the Nigerian economy. American Journal of Economics, 2(3), 33-40.

Dinh, T. T., Vo, D. H., Vo, A. T. & Nguyen, T. C. (2019). Foreign direct investment and economic growth in the short run and long run: Empirical evidence from developing countries. Journal of Risk and Financial Management, 12(176), 1-11.

Edrees, A. (2015). Foreign direct investment, business environment and economic growth in Sub-Saharan Africa: Pooled mean group technique. Journal of Global Economics, 3(2), 1-5.

Eze, A. A., Nnaji, M. & Nkalu, N. C. (2019). Impact of foreign direct investment on manufacturing sector output growth in Nigeria. International Journal of Applied Economics, Finance and Accounting, 5(2), 55-64.

Hojjati, M. (2015). Does foreign direct investment generate economic growth in Sub-Saharan Africa? (Bachelor thesis, Sodertorn University, Sweden).

Iqbal, N., Ahmad, N., Haider, Z. & Anwar, S. (2013). Impact of foreign direct investment (FDI) on GDP: A case study from Pakistan. International Letters of Social and Humanistic Sciences, 16, 73-80.

Jilenga, M. T., Xu, H. & Gondje-Dacka, I. (2016). The impact of external debt and foreign direct investment on economic growth: Empirical evidence from Tanzania. International Journal of Financial Research, 7(2), 154-165.

Kareem, S. D., Kari, F., Alam, G. F., Makuachukwu, G. O. & Oke, M. D. (2012). Foreign direct investment into oil sector and economic growth in Nigeria. The International Journal of Applied Economics and Finance, 6(4), 127-135.

Khaliq, A. & Noy, I. (2007). Foreign direct investment and economic growth: Empirical evidence from sectoral data in Indonesia. Retrieved from ssrn.com.

Makki, S. & Somwaru, A. (2014). Impact of foreign direct investment and trade on economic growth. American Journal of Agricultural Economics, 86(9), 795-801.

Mamingi, N. & Martin, K. (2018). Foreign direct investment and growth in developing countries: evidence from the countries of the organisation of Eastern Caribbean States. CEPAL Review, 124, 80-98.

Mazenda, A. (2014). The effect of foreign direct investment on economic growth: Evidence from South Africa. Mediterranean Journal of Social Sciences, 5(10), 95-108.

Melnyk, L., Kubatko, O. & Pysarenk, S. (2014). The impact of foreign direct investment on economic growth: Case of post communism transition economies. Problems and Perspectives in Management, 12(1), 17-24.

Moudatsou, A. (2003). Foreign direct investment and economic growth in the European Union. Journal of Economic Integration, 18(4), 689-707.

Okegbe, T. O., Ezejiofor, R. A. & Ofurum, D. I. (2019). Foreign Direct Investment (FDI) and Nigerian economic growth. International Journal of Accounting, Finance and Risk Management, 4(1), 15-23.

Olokoyo, F. O. (2012). Foreign direct investment and economic growth: A case of Nigeria. BVIMSR’S Journal of Management Research, 4(1), 1-30.

Osunkwo, F. O. C. (2020). Foreign direct investment and economic growth of Nigeria (1980- 2018). Journal of Economics and Business, 3(1), 398-403.

Oyero, K. B. L. (2019). Foreign direct investment trends and economic growth in Africa: Nigeria experience in pre-recession era. International Journal of Academic Accounting, Finance & Management Research, 3(3), 1-7.

Ozawa, T. (1992). Foreign direct investment and economic development. Transnational cooperation, 1(1), 27-54

Sghaier, I. M. & Abida, Z. (2013). Foreign direct investment, financial development and economic growth: Empirical evidence from North African Countries. Journal of International and Global Economic Studies, 6(1), 1-13.

Tang, S., Selvanathan, E. A. & Selvanathan, S. (2008). Foreign direct investment, domestic investment, and economic growth in China. UNU-WIDER Research Paper No. 2008/19.

Tshepo, M. (2014). The impact of foreign direct investment on economic growth and employment in South Africa: A Time Series Analysis. Mediterranean Journal of Social Sciences, 5(25), 18-25.

Ullah, I., Shah, M. & Khan, F. U. (2014). Domestic Investment, foreign direct investment, and economic growth nexus: A case of Pakistan. Economics Research International, 2014, 1-5.

Uwubanmwen, A. E. & Ogiemudia, O. A. (2016). Foreign direct investment and economic growth: Evidence from Nigeria. International Journal of Business and Social Science, 7(3), 89-103.

Zain, M. (2019). Impact of foreign direct investment on economic growth of Pakistan. Gyancity Journal of Electronics and Computer Science, 4(2), 1-12