Assessing the Effect of Foreign Direct Investments on the Performance of Manufacturing Subsector in Nigeria

Abstract

This paper has been on assessing the effect of foreign direct investment on the performance of manufacturing subsector in Nigeria.  Ex-post facto research design was utilized and foreign direct investment, average manufacturing capacity utilization and oil and refining, cement and other manufacturing subsector performance measures were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank Development Indicators during the period 1981 to 2016.  The data were analysed using stationarity and unit root test, co-integration, parsimonious error correction model, and granger causality tests.  The result indicates that foreign direct investment and average manufacturing capacity utilization were not statistically significant in explaining the changes in oil and refining firms contribution to the sector.  Contrarily, it was established that foreign direct investment was statistically significant in explaining other manufacturing firms’ contribution to the sector.  The result overall indicates that policies to attract foreign direct investment if well managed could improve the manufacturing subsector performance in Nigeria.  On the basis of this, it was recommended among other that the government should deepen their efforts to open up the manufacturing subsector to foreign direct investments.  This will reduce the dominance of a particular company in the sector and further improve the output of the manufacturing subsector.

Keywords: Foreign direct investment; manufacturing performance; economic growth

DOI: 10.7176/EJBM/11-35-02

Publication date: December 31^st 2019