Foreign Direct Investment in Real Sector and Economic Growth in Nigeria, 1986 – 2011: A Parsimonious Error Correction Model

Abstract

The paper represents part of larger research agenda aimed at investigating the impact of FDI on economic growth. The study which is a sectoral analysis examined the impact of agriculture, manufacturing, mining and telecommunication sectors on economic growth for the period 1980-2011. The econometric method includes co-integration test, over-parameterized and error correction model. Results reveal that in the long run agriculture and manufacturing have negative impact on growth while mining and telecom sectors exhibit positive influence on economic growth. In the short run, results show that FDI in agricultural sector has either negative or no impact on economic growth while impact of manufacturing on growth is completely negative. On the other hand, the impact of mining and telecom sectors on growth is positive in the short run. The study recommended among other things that effort should be intensified by all levels of government, public and private sectors to revise the ugly trend where foreign investors are not keen in investing in the agricultural sector and that enabling laws guiding priority area for foreign investors where agriculture is considered topmost should be put in place.

Keywords: Foreign Direct Investment, Economic Growth, Co-integration, Parsimonious Error Correction Model.