Impact of Foreign Direct Investment on the Power Sector of Nigeria 1980 – 2014

Abstract

The study investigated on the role of foreign direct investment on the power sector of Nigeria using time series data for 35years between 1980 and 2014. Power sector output (PSO) serve as the dependent variable while foreign direct investment (FDI), inflation rate (IFR) and trade openness of the economy (OPE) serves as the independent variables. The variables were analyzed using regression method, Augmented Dickey fuller unit root and co-integration test with the aid of a statistical software known as Eview 7. The findings revealed that only FDI and OPE are statistically significant at 5% level based on the t-statistic. The F-statistic also revealed that there is significant impact of the role of foreign direct investment on the power sector of Nigeria due to the overriding effect of trade openness of the economy within the period considered. The Augmented Dickey-Fuller unit root and co-integration test also revealed that the variable are stationary and does not have a unit root problem and that there is only one co-integrating equation of the variables. Among other recommendations, the study suggests that FDI should focus more on Nigeria’s power sector because of the strategic relevance of the sector to the nation’s economy.

Keywords: Foreign direct investment, Power sector Nigeria