Economic Growth Stimulation through Foreign Direct Investment: The Nigerian Perspective

ZULAIHA A ZUBAIR, S.A. Aladejare

Abstract


This study investigates the relationship between foreign direct investment (FDI) and economic growth from 1980 to 2015, with emphasis on understanding the Nigerian experience. The study adopted the Johansen cointegration test for long-run association determination, as well as a static OLS model to ascertain the long run effect of FDI and other explanatory variables on economic growth. In other to also investigate the short-run effect of FDI on economic growth, the error correction approach was adopted. A causality test between the explanatory variables and economic growth was also carried out. The study findings revealed that FDI does positively impact on economic growth in both long run and short run periods. Also, the overall positive significance of export on growth (i.e., in both short-run and long-run) simply confirms the obvious that export promotion policies are actual drivers of growth in the economy. The study thus concludes that for the purpose of sustainable growth, it is imperative for policies that would encourage both domestic and foreign investors to be pursued. Furthermore, for FDI to spur growth, macroeconomic variables such as exchange rate, real interest rate, the degree of openness, inflation, etc, should be properly managed in the Nigerian economy.


Keywords


Foreign Direct Investment; Economic Growth; Nigeria

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References


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