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ABSTRACT
Foreign direct investment inflows have been a key factor towards the development of developing countries of which Nigeria happens to be one of. This catalyst for development was quite appreciated having focused on disaggregated sectorial output growth in Nigeria. This is done so as to appreciate the extent to which FDI has impacted on the various sectors of the economy. It is based on this that the study was geared to focus on the relationship or nexus between FDI and disaggregated sectorial output growth in Nigeria. This nature bothered around an impact analysis and a causal analysis.
The nature of this study required high data frequency and the study utilized a quarterly data from 1981Q1 to 2017Q4. The vector error correction model (VECM) was adopted, which answered the impact analysis alongside the causal analysis question. The study found that FDI impacts positively on FDI, agricultural sector growth and negatively on the oil sector growth. Specifically, the inflow of FDI last year encourages FDI, and agricultural sector growth this year, while it discourages oil sector growth this year. However, other sectors of the economy felt no impact from the flow of FDI within the period under study. Also FDI was seen to be capable of predicting the values of the manufacturing sector, and agricultural sector growth was capable of predicting the values of FDI in Nigeria.
The study recommends among other things for the government to make the environment more conducive to attract FDI into the economy. This could be in the form a reduction in the real interest rate, going by the Mundell Fleming model which will attract foreign funds to the country.
