Empirical Assessment of the Impact of Foreign Direct Investment on Economic Growth in Nigeria

Abstract

The study empirically examined the impact of Foreign Direct Investment on economic growth in Nigeria from 1981 to 2023. The study used Auto regressive Distributive Lag (ARDL), unit root test of Augmented Dickey Fuller and Phillips Perron. The test showed that real gross domestic product and exchange rate were found to be stationery at first difference; foreign direct investment and trade openness were found to be stationery at level. Based on the result, the Auto regressive Distributive Lag (ARDL) model showed that in the short run foreign direct investment has positive and statistical significant effect on real gross domestic product at lag 1 and 2, openness has negative but statistically significant impact on gross domestic product in Nigeria, at lag 1. Exchange rate has negative and statistically insignificant impact on gross domestic product at lag 1, 2 and 3. Based on the long run coefficient, foreign direct investment indicates positive and statistically significant effect on gross domestic product, openness has positive and statistically significant effect on gross domestic product, exchange rate has positive and statistically significant effects on gross domestic product in Nigeria in the long run. The study recommends that government should create a sound and conducive business environment in order to attract foreign investors to the country.