An Empirical Analysis of the Impact of Foreign Direct Investment and Industrial Sector Performance on Nigerian Economy

Abstract

This research investigated the impact of foreign direct investment and industrial sector performance on Nigeria economy using time series annual data from 1981 – 2015. The study explores dynamics amongst the variables within the Vector Error Correction Model (VECM). The Augmented Dickey Fuller (ADF) and Philip Perron’s (PP) test reveals that all variables contained a unit root and were integrated of order one I(1).  The Johansen Cointegration test result reveals the presence of a long-run relationship between FDI, Industrial Sector Output and GDP. Furthermore, VECM estimate shows that FDI and industrial sector output had a slight significant positive impact on GDP.The study concludes that Nigeria is yet to fully reap the benefit of FDI since its contribution to GDP is still very low at the moment, whilst the contribution of the industrial sector in the country has not been vibrant enough to spur economic growth in Nigeria. The study therefore recommends among other things that social and economic infrastructure be improved as this will help lessen the burden of industrialist and eventually lower the cost of doing business and in turn attract FDI inflow into Nigeria.

Keywords: Industrial Sector, Dynamics, Cointegration, Inflow, Economy

DOI: 10.7176/EJBM/11-11-08

Publication date: April 30^th 2019