An Analysis of Foreign Direct Investment (FDI) and Economic Growth: Empirical Results from Nigeria

Abstract

In theory Foreign Direct Investment (FDI) is believed  to  have  several  positive  relationship  with the  economic growth of  the  host  country  (such  as productivity gains, technology transfers, the introduction of new processes, managerial skills and know - how, employee training) and in general it is a significant factor in modernizing the host  country’s  economy  and  promoting  its  growth. It is in this light that this paper offered to take the impact of FDI on Nigeria’s economic growth. Using annual data over the period 1981 to 2014, this study examines the contributions of FDI to Nigeria’s economic growth. Employing an unrestricted vector autoregressive model (VAR), empirical estimates showed that over the period of analysis, FDI had a negative influence on economic growth in the country. This is contrary to the theories highlighting the importance of improving trade openness giving FDI inflows a prominent role in the development strategy of a country.

Keywords: Foreign Direct Investment, Economic Growth, Empirical, Vector Autoregressive

DOI: 10.7176/JESD/11-8-16

Publication date: April 30^th 2020