An Empirical Investigation of Foreign Direct Investment, Export, Import and Government Revenue Generation in Nigeria (1981-2017)

Abstract

This study empirically investigated government revenue implications of foreign direct investment, export, import and exchange rate  in Nigeria over the period 1981 and 2017 using secondary data sourced from Central Bank of Nigeria Statistical Bulletin and National Bureau of Statistics. Augumented Dickey Fuller (ADF) unit root test, Phillips-Perron (PP) unit root test, Johansen Co-integration test and Ordinary Least Square (OLS) of multiple regression models were employed to establish the nexus between endogenous and exogenous variables. Empirical findings revealed a positively and significantly relationship between export (EXPT) and government revenue generation (GREV). A one percent change in export (EXPT) would lead to 73.24 percent change in government revenue generation which is in conformity to apriori theoretical expectation. The findings also revealed that foreign direct investment (FDI), import (IMPT) and exchange rate (EXGR) have inverse relationship with government revenue generation (GREV). A one percent  change  in   FDI, IMPT  and   EXGR   will      cause     -0.611434, -0.009879 and -0.493292 percent reductions in government revenue generation respectively. Based on the findings, government at all levels should provide enabling environment in terms of massive investment in critical infrastructure, adequate and efficient security system, political stability and favorable fiscal policy to attract new foreign investors and prevent existing ones from further relocation to neighboring countries. Also, exportation of finished products rather than primary products should be the focus of both public and private enterprises for sustained increase in government revenue generation. In addition, preference should be given to importation of capital goods rather than consumer goods by the government so as to produce more exportable products for revenue acceleration. Finally, establishment of a stable exchange rate regime by the government is germane to the attraction of enormous foreign direct investment.

Keywords: Government Revenue, Foreign Direct Investment, Export, Import, Exchange Rate,  Unit root test, Johansen Co-integration, Ordinary Least Square, Nigeria