AN ASSESSMENT OF THE IMPACT OF FOREIGN DIRECT INVESTMENT ON NIGERIAN ECONOMIC GROWTH (1990-2011)

Abstract

The paper investigated Foreign Direct investment impact on economic growth in Nigeria using annual data for 1990 to 2011, from CBN Statistical bulletin 2011. Augmented Dickey Fuller (ADF), Johansen Co integration, Error Correction Model (ECM) and Pairwise Granger causality tests were tools of analysis. ADF result showed that all the variables [gross domestic product (GDP), foreign direct investment (FDI), Gross Fixed Capital Formation (GFCF) and exchange rate (EXR)] became stationary after differencing once. The ECM showed FDI as having positive but insignificant impact on GDP, while GFCF is positive and significant. EXR shows insignificant inverse relationship with GDP. The model speed of adjustment is about 52%. There exist a one-way causality from FDI to GDP and a bi-directional causality between FDI and GFCF. Implying that building of durable world class infrastructure that boost’s a country’s capital sock is needed by government and private sector to enhance FDI inflow, hence economic growth.