Government Security Spending, Foreign Direct Investment and Economic Growth in Nigeria: 1986-2017

Abstract

This paper is an assessment of government security spending, foreign direct investment and economic growth in Nigeria covering from 1986 to 2017. The study used time series data and econometrics tools were used for testing for the stationarity, causality and co-integration. To show the long run and short run impact and the relationships among the variables, Ordinary Least Squares and Error Correction Model were adopted. The findings show that there is short run and long run impact of government security spending and foreign direct investment on economic growth in Nigeria. Some of government security spending and foreign direct investment indicators were negatively related to Real Gross Domestic Product while some were positively related to Real Gross Domestic Product in Nigeria. Government internal security spending shows strong and positive impact on economic growth in Nigeria. The study shows that foreign direct investment has weak impact on Real Gross Domestic Product in Nigeria and this weak impact may be due to the fact that the sub-sector has been facing the problems of corruption and other socio-economic issues that have increased the cost of doing business and as such foreign investors would prefer to invest in countries with lower rates of corruption which is believed to derive maximum profits from their investments. Therefore, the study recommends that fiscal discipline should be adhered to strictly; the fight against corruption should be total and transparent; government should straighten and deepen all incentives, institutional and regulatory frameworks in the country, issues of insecurity should be addressed without any sentiment in order to foster foreign direct investment for sustainable economic growth in Nigeria.