International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

Estimating the Impact of Foreign Direct Investment in Nigeria
Alexander Abraham Anfofum, Joshua Samuel Gambo, Tauhid Suleiman

The inflow of foreign direct investment to developing countries has continued to be on the increase but empirical findings suggest mixed evidences. This study investigates the relationship between FDI and economic growth in Nigeria. The variables used in this study where stationery after the first and second differencing at 5% level, indicating the absence of a spurious and misleading interpretation of regression results. The ordinary least square equation was disaggregated into five equations, a cointegration and Granger causality techniques were employed to determine the relationship between economic growth and FDI. The outcome of the estimated results revealed that FDI spurs exports, gross fixed capital formation and economic growth in Nigeria. Thus, FDI is a positive measure of economic growth. The Johansen unrestricted cointegration rank test showed a long run significant relationship between FDI and economic growth. The Ganger causality outcome revealed the presence of unidirectional causality running from economic growth to foreign direct investment. This study recommends improvement in infrastructural development especially in good roads and electricity supply as this will increase the level of development which will in turn attract more inflow of FDI. The government should provide an enabling environment in the area of security so that foreign investors would be encourage to invest more and local investors will not relocate to neighboring countries.

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