Foreign Direct Investment Inflows And Economic Performance In A Developing Economy: Nigerian Evidence

Abstract

Motivated by the need for a classified and comparative analysis of the effects of oil related and non-oil related foreign direct investments on Nigeria’s economic growth, this study evaluates secondary data obtained from Central Bank of Nigeria's Statistical Bulletin over the period 1981 to 2016 (36 years). Statistical techniques, which include Stationarity, Multiple Regression, Johansen's Co-integration, Error Correction Estimations and Granger Causality tests, were employed to evaluate the prevailing inter-relationships as well as the extent to which these classified foreign direct investment inflows do promote, and/or support Nigeria's economic growth. On the whole, the results of this study show that irrespective of the prevalence of significant long run relationship among the study variables, both the short and long run estimations as indicated by the multiple regression and error correction estimates, provide compelling evidences of significant sensitivities of Nigeria’s economy to only variations in non-oil related FDI inflows. However, the Granger Causality test results indicate significant prevalence of two unidirectional causalities between Nigeria’s GDP and both oil and non-oil related FDI inflows with Causality flowing from oil and non-oil related FDI to the GDP in both cases. Because of the greater sensitivity of Nigeria’s GDP to non-oil related FDI inflows compared to oil related FDI inflows, the study concludes that non-oil related FDI inflows are more beneficial to Nigeria's economy compared to oil related FDI inflows. Consequently, it is recommended that both Nigeria's private sector entrepreneurs and the government should make further efforts to market and attract more foreign direct investors in the non-oil related sector of the Nigerian economy in order to maximize business opportunities in the non-oil sector of Nigeria’s economy as well as aid diversification in Nigeria’s economy.

Keyword: Oil Related FDI Inflows, Non-Oil Related FDI Inflows, Economic Performance.