FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS FROM NIGERIA

Abstract

The study examines the effects of foreign direct investment (FDI) on economic growth in Nigeria.  Time-series data was adopted for this study from 1986 - 2023 was sourced from Central Bank of Nigeria (CBN), Nigeria stock exchange and Securities Exchange Commission (SEC). Data was subjected to regression analysis which was used to estimate the parameters of the model. The findings revealed a positive relationship between FDI and economic growth. The coefficient of real effective exchange rate indicates a weak positive association with economic growth. Essentially, the coefficient of gross fixed capital formation is positive but not significantly on economic growth. With a p-value of 0.0279, this relationship is statistically significant. This result aligns with economic theory, as investment in physical capital like infrastructure and machinery typically drives productivity and growth. The study therefore recommends that targeted policies should be implemented to attract and retain FDI, particularly in sectors with high growth potential such as manufacturing, infrastructure, and ICT via offering investment incentives, streamlining bureaucratic procedures and improving investor protection laws.