IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM NIGERIA, 1985-2016

This study analyses the impact of foreign direct investment on economic growth in Nigeria using data for 32 years, from 1985-2016. The OLS estimation and the Johansen cointegration test were the key techniques of analysis employed. The results indicate that foreign direct investment has no positive impact on the Nigerian economic growth. Trade openness and exchange rate, however, have positive but insignificant influence on economic growth. The cointegration test result revealed that there is evidence of a long-run relationship between foreign direct investment and economic growth. The paper thus recommends that there is need for in-depth investigation of economic and institutional forces that determine the composition of FDI inflows to developing countries and to work towards improving such forces. Moreover, government should also take measures in order to stabilize the exchange rate system that may attract foreign investors in the country, and also liberalize the trade policy to attract foreign investors to the country.

JEL: E22, F21, G11