Foreign Direct Investment and Economic Performance Indicators-empirical Evidence from Nigeria

Abstract

The Federal Government of Nigeria like every other developing country in the world is to improve welfare of her citizens and develop its infrastructures for the country's economic growth. However, lack of infrastructures, and inadequate national savings, occasioned by poor leadership, corruption and policy inconsistency, has greatly affected the ability of the country to achieve an all-inclusive economic growth.  The study examined the impact of Foreign Direct Investment on the economic growth in Nigeria using Gross Domestic Products growth rate (GDPGR), Gross Fixed Capital Formation (GFCF) and Index of Industrial Production (IIP) as measures of economic growth, while FDI, Inflation, Exchange rate, Interest rate, Financial Deepening and Degree of Openness were used as independent variables. The study used secondary data from 1981-2016 which were extracted from the Central Bank of Nigeria Statistical Bulletin (2016), the Annual Abstract of Statistics of the National Bureau of Statistics (NBS), World Bank's Development Indicator and from Internet sources.  Descriptive statistics and inferential statistics using Granger Causality and Ordinary Least Square regression methods were employed.  The result of the findings revealed a negative relationship between Foreign Direct Investment and Gross Domestic Product growth rate (GDPGR), (0.1273 > 0.05); even though FDI has a no significant impact on Nigerian's economic growth at 5% significance level. It was also noted from the study that FDI has significant positive relationship with Gross Fixed Capital Formation Capital (GFCF), (0.0003 < 0.05).  The study further showed that FDI has a significant positive relationship with Index of Industrial Production (IIP), (0.0003 < 0.05).    The study concluded that FDI has positive impact on the Nigerian economy which is needed for the nation's economic growth.  The study recommends that Federal Government of Nigeria should put in policies that will liberalize the economy and attracts foreign direct investments.  It is also recommended that government at all levels in Nigeria, should aggressively invest in infrastructural development, which helps to reduce the cost of doing business, while the Central Bank of Nigeria should allow the foreign exchange market to be driven by the forces of demand and supply, as a way of boosting foreign investors' confidence in the economy.