Abstract
The analysis of the impact of Foreign Direct Investment (FDI) on sectoral growth in Nigeria from 1991 to 2021 reveals mixed outcomes for the manufacturing and services sectors.
For the manufacturing sector, FDI has a statistically significant, albeit minor, negative impact on Manufacturing Value Added (MVA). This suggests that increased foreign investment does not necessarily translate into manufacturing growth, highlighting potential inefficiencies or structural issues within the sector. The significant negative relationship between the exchange rate and MVA further indicates the need for effective exchange rate management to support manufacturing competitiveness.
In contrast, for the services sector, FDI shows an insignificant positive impact on Service Value Added (SVA). This suggests that foreign investment is not a primary driver of growth in the services sector, with domestic credit and ICT advancements playing more significant roles. The positive relationship between the exchange rate and SVA contradicts expectations but suggests that a stronger domestic currency can positively influence value-added activities in the services sector.
To maximize the benefits of FDI, policymakers should focus on creating a conducive investment environment, managing exchange rate stability, and promoting infrastructure and technological advancements. By addressing these areas, Nigeria can better harness FDI to drive sectoral growth and achieve broader economic development objectives.
