Foreign Direct Investment and Economic Growth in Nigeria: Sectors Specific Analysis (1970 – 2016)

Abstract

This study examined the effect of Foreign Direct Investments flow to agriculture, manufacturing and processing, and mining and quarrying subsectors of the Nigerian economy on Economic Growth (GDP). Conceptual as well as empirical literature were reviewed and evaluated. The relevant data were extracted from the annual statistical bulletin of the central Bank of Nigeria. A unit root test was carried out using Augmented Dickey Fuller method which revealed that the variables were integrated at different orders. The autoregressive distributive lag/bound test was used to explore the long run relationship existing among the variables in our model and the result of the bound test showed that the variables are co-integrated thus the study proceeded in evaluating the long run as well as the co-integrating form in the model. It was found that Foreign Direct Investments to agriculture does not support the growth of the Nigerian economy in the long run as its coefficient turned out negative and insignificant whereas the coefficient of manufacturing and processing was not significant both in the short and long run, mining and quarrying was not significant in the long run, however it was significant in the short run. The study recommended that government can by the use of moral suasion; appeal to foreign investors to plough back about 70% of their earnings so as to expand their output as such expansion will invariably increase the Gross Domestic Products growth; Frantic efforts should also be made through active policies to redirect some of the excess and idle capital in the mining sector to other producing sectors like agriculture and manufacturing as such will help to check the increasing inflation rate caused by idle resources in some overcrowded sectors in the Nigerian economy.