Foreign Direct Investments and Industrial Productivity in Nigeria

Abstract

The potential impact of Foreign Direct investments (FDI) on recipient and investing economies  is of considerable policy interest. Important to the theory of foreign direct  investments  in Nigeria are the questions of whether foreign investors coming to Nigeria  are market seeking or export driven ; if they are  natural resource seeking or strategic asset driven. This finding is relevant to economic managers in the design and implementation of appropriate macroeconomic policies to attract FDI. It is also relevant to  investigate whether FDI contributes to overall capacity development of the economy or not .This study investigates the contribution of FDI to industrial productivity in Nigeria. Using the disaggregated  components of industrial productivity i.e.(Industrial, Manufacturing and Mining sector productivity indices) as proxies for the dependent variables. These were  regressed  against  Foreign Direct Investments ; expressed as a function of Gross Domestic Product ; this is in conjunction with other independent and control variables  that are deemed to affect the level of industrial productivity. Outcome of the study indicates that industrial productivity in Nigeria is not FDI driven. However, upon disaggregation into component sectors, it was ascertained  that FDI has a positive and significant relationship with  mining sector  productivity in Nigeria at 5% Alpha level in the short run. This did not come as a surprise seeing that the oil industries  belong to this sector. The impact of FDI is mostly restricted to the oil sector. The weak linkage  between the oil sector and the rest of the economy hinders any possible spillover effects from FDI unto the larger economy. The study concludes that our over reliance on foreign direct investments as a source of economic growth and industrial productivity has not been justified. While we reiterate that, there might be need for foreign direct investments, we should not be totally dependent on it.. The study therefore, recommends a conscious effort on the path of  federal government  to look inwards for productivity enhancing attributes that could cater for our developmental needs as no foreign nation will do it for us . It is also being advised that the  Nigerian  government and policy formulators need to enact some investor friendly policies that will encourage, promote and  attract/retain more foreign direct investments and to provide a conducive and enabling environment.

Key words: Foreign Direct Investment, Industrial sector productivity, Manufacturing  sector productivityMining sector productivity.