Foreign Direct Investment and Economic Growth in Nigeria Revisited: A Sector Level Analysis

Akinyemi Ajibola, Muideen Isiaka, Olusogo Ogunleye, Oluwaseun Adeyemi

Abstract


Given the conflicting nature of empirical findings on the impact of foreign direct investment on economic growth in developing economies to date, this research explored the growth impact of sectoral flow of FDI in Nigeria an aspect largely neglected in the existing literature. The study examined the sectorial impact of FDI in manufacturing, mining, oil and the telecommunications sectors on economic growth in Nigeria based on a theoretical framework founded on the standard growth accounting theory, the detailed analysis of the sectorial FDI (which is only available for over the period 1986-2009) was carried out. This involved the use of descriptive analysis, unit roots test, Johansen co-integration test, error correction mechanism, and fully modified least squares technique. The correlation analysis of aggregate FDI on sectorial GDP growth indicates that only the oil sector GDP has a significant positive correlation with aggregate FDI over the period 1981 and 2017. While the sectorial analysis revealed that only the flow of FDI into the communication sector has a positive and statistically significant impact on economic growth for the period considered. Given the positive significant growth impact for FDI in the telecommunication sector, and the negative significant growth impact of FDI in the manufacturing sector, the strategy for attracting and managing FDI in Nigeria must be sector specific and the National Bureau of Statistics must maintain a database of FDI on sectoral basis.


Keywords


Sectorial FDI; Manufacturing FDI; Mining FDI; Oil FDI; Telecommunication FDI

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DOI: http://dx.doi.org/10.20321/nilejbe.v4i10.170

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