Munich Personal RePEc Archive

How important is Foreign Direct Investment to Economic Growth? New Evidence from Nigeria

Owolabi-Merus, Olasunkanmi (2015): How important is Foreign Direct Investment to Economic Growth? New Evidence from Nigeria. Published in: Pacific Business Review International , Vol. 7, No. Issue 8 (February 2015): pp. 11-16.

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This study investigates the impact that Foreign Direct Investment (FDI) has on economic growth in Nigeria through the use of annual secondary data from 1981 to 2013 collected from the World Bank’s Africa Development Indicators. The econometric methodologies used in this research are Ordinary Least Squares (OLS), ADF unit root and the Granger Causality tests. The OLS results shows that FDI positively contributes to economic growth in Nigeria, but not statistically significant at the 5% level of significance. However, Gross Fixed Capital Formation (GFCF) is found to have a positive and statistically significant contribution to Nigeria’s economic growth. The unit root test shows that the variables are stationary and the Granger Causality test connotes a unidirectionary causation running from FDI to GDP but not vice-versa. But no mutual correlation is found between GFCF and GDP. This study recommends that policymakers in Nigeria should focus on instigating strategies geared towards increasing capital formation (GFCF) in order to present an attractive platform that will stimulate and encourage FDI inflow which will in whole, facilitate the increase and sustenance of economic growth in the country.

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