Co-integration Analysis of Foreign Direct Investment Inflow and Development in Nigeria

Abstract

The paper aimed at evaluating the co-integration analysis inflows of FDI from Ghana and South Africa tothe growth of the Nigerian economy. Data are derived from UNCTAD (2008), the African DevelopmentBank (2008) and the 2008 World Development Indicators of the World Bank (2008), and span from 1979to 2007of the Sub-sahara Africa Region. We build vector Auto-regression models and compute bounds Fstatisticsto test for the absence of a long-run relationship between foreign direct investment and growth.We also construct vector autoregressive models and compute modified Wald statistics to test for the noncausalitybetween FDI and economic growth. Granger test revealed that NGDP causes SAFDI and bothSAFDI and GFDI granger cause which implied long run relationship between FDI inflows anddevelopment in Nigeria.

Keywords: Johnsen test, VAR, Jargue-Bera, Ramsey test, FDI, GDP.