THE IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

The study was carried out to examine the Impact of Foreign Direct Investment on Economic Growth in Nigeria for the period of 1991-2021. The data used for the study were obtained from Central Bank of Nigeria Statistical Bulletin and World Development Indicators of World Bank. The study employed Ordinary Least Squares method. However, the poor D.W stats yielded from the OLS technique informed the need for further diagnostic tests such as the Breusch-Godfrey Serial Correlation L-M Test, the Breusch-Pagan-Godfrey Test of Heteroskedasticity, the Normality Test and the Ramsey-Reset Test. The empirical findings from the Ordinary Least Squares method showed that Foreign Direct Investment and Trade Openness have negative and significant impact on Economic Growth while Real exchange rate has a negative and insignificant impact on Economic Growth and Real Interest rate has a positive and significant impact on Economic Growth in Nigeria. Although, some of the results was in contrast with our apriori expectation like FDI, Trade openness and Real Interest rate, it gives further insight into the current impact of the variables. The negative impact of FDI is adduced to the low level of supervision of the activities of foreign investors in the country and lack of adequate institutional frameworks and other challenges hindering the positive benefit of foreign direct investment in the country. The study also confirmed the non-existence of autocorrelation between the variables and confirms the reliability and stability of the model, as against the initial indication of serial correlation in the model indicated by the low D.W statistic. Based on the findings, the study recommends that; the government should undertake comprehensive structural reforms to address the challenges associated with FDI, enhance supervision of multinational companies, implement institutional reforms, diversify FDI sources and implement strategic trade policies in order to better harness the positive benefits of foreign direct investment in the country.