Effect of Foreign Direct Investment on Economic Growth in Nigeria

Abstract

Nigeria as a nation has used foreign direct investment as a mean to complement the domestic resources toward economic growth. Many literature have suggested a positive effect of foreign direct investment on economic growth while others see it in another angle. It is as a result of this differences that necessitate the need of this study to investigate whether foreign direct investment has a causal relationship with Nigerian economic growth. The study covered the period of 38 years of 1981-2018. The study employed secondary data sourced from the Central Bank of Nigeria. The Ordinary Least Square of the Regression model was used with E-view –version (10) for statistical analysis. The results reveal that Foreign Direct Investment has a significant effect on the Nigerian economy growth represented by gross domestic product. The result also find that exchange rate has a positive effect on the Nigerian economy growth. Thus, the conclusion of the study is that foreign direct investment and foreign exchange have causal relationship with economic growth in Nigeria. The study recommends that the Nigeria government should improve the infrastructural development of the nation in order to encourage more economy (driven) FDI. Also, the Nigeria government should improve the security situation of the nation so as to attract more investment. Finally, there is need to have a total liberalization of the trans-national investment sector. This will help to remove barriers and create a free investment environment for the nation.