Impact of Foreign Direct Investment on Economic Growth in Nigeria

Authors: 
Ebunoluwa O. Oyegoke, Osman Nuri Aras
DOI Number: 
http://doi.org/10.31039/jomeino.2021.5.1.2
Abstract: 
In most developing countries, Foreign Direct Investment (FDI) serves as a means of earning foreign reserves via investments, businesses and foreign aids from advanced countries. FDI is considered a valuable source of finance and capital formation, Technology-Transfer and know-how, as well as a viable medium for trade among countries. The Spillover effect also allows for the transfer of innovations and invention to the receiving countries, one of which Nigeria belongs. According to the requirement for accelerated growth in association with the Sustainable Development Goals is not completely clear, however, for economies to experience sustainable and inclusive development, cross-border trade is paramount. Presently, Nigeria is the first host economy of FDI in Sub-Saharan Africa, and the third in the continent. Recently, Nigeria has witnessed several trade policies which aim at diversifying the economy away from oil revenue. These policies are focused on improving the industrial sector, and of course, results in austerity. In 2018, the total FDI inflow to the country was around USD 1.9 billion, while in 2017, FDI inflow was around USD 3.5 billion, showing a decrease due to the consequence of the austerity measures imposed in 2018. At the third quarter of 2019, the FDI was only 3.37% (USD 200.08 million) of the total capital inflow for the period. Traditionally, FDI is designed to improve the recipient economies thereby enhancing economic growth and development, it is in this view that many developing countries attract foreign investors with the hope of strengthening their economy by increasing the foreign investment portfolio. However, most empirical analysis of the impact of FDI on economic growth advises otherwise, hence, a controversy. According to the existing literature, some empirical results found a negative relationship between FDI and economic growth, while others opined that as FDI increases, it results in a boost of output productivity, hence a positive relationship between the variables. Therefore, this study contributes to the existing literature by investigating the effects of FDI both on the owner, and the host country, using Nigeria as a case study.
Keywords: 
Foreign Direct Investment, Economic Growth, Sustainable Development Goals, Nigeria.
Full Text: 
File download
References: 

 

Emmanuel, I. J. (2016). Effect of Foreign Direct Investment on Economic Growth in Nigeria. European Business and Management, 2(2), 40-46.

UNCTAD, U. (2019). World Investment Report, 2019. New York: United Nations Publications.

Akanegbu, B. N., & Chizea, J. J. (2017). Foreign Direct Investment and Economic Growth in Nigeria: An Empirical Analysis. European Journal of Reseach in Social Sciences, 5(1), 1-10.

Umeora, E. C. (2011). Effects of Foreign Direct Investment (FDI) on Economic Growth in Nigeria. SSRN, 1-14.

Anetor, F. O. (2019). Economic Growth effects of Private Capital inflow: A Structural VAR approach for Nigeria. Journal of Economics and Development, 21(1), 18-29.

Uwubanmwen, A. E., & Ogiemudia, O. A. (2016, March). Foreign Direct Investment and Economic Growth: Evidence from Nigeria. International Journal of Business and Social Science, 17(3), 1-15.

Egbo, O. P. (2010, April). An Analysis of Foreign Direct Investment Inflow and Economic Growth in Nigeria . Unpublished PhD Thesis Submitted to the Department of Banking and Finance, University of Nigeria, Enugu Campus.

Akiri, S. E., Vehe, B. M., & Ijuo, A. O. (2016). Foreign Direct Investment and Economic Growth in Nigeria: An Empirical Investigation. IIARD International Journal of Economics and Business Management, 2(5), 1-12.

Sokang, K. (2018). The Impact of Foreign Direct investment on Economic Growth in Cambodia: Empirical Evidence. International Journal of Innovation and Economic Development, 4(5), 31-38.

Gudaro, A. M., Chhapra, I. U., & Sheikh, S. A. (2012). Impact of Foreign Investment on Economic Growth: A Case Study of Pakistan. Journal of Management and Social Sciences, 8(2), 22-30.

Melynk, L., Kubatko, O., & Pysarenko, S. (2014). The Impact of Foreign Direct Investment on Economic Growth: Case of Communism Transition Economies. Problems and Perspectives in Management, 12(1), 1-9.

Muhammad, S. M. (2017). Research Gate. Re: In case of Johansen Cointegration test , what to do when Result of trace test and Maximum Eigenvalue test differs?. . Retrieved July 2020, from www.researchgate.com: https://www.researchgate.net/post/In_case_of_Johansen_Cointegration_test...

LEITAO, N. C., & RASEKHI, S. (2013). The Impact of Foreign Direct Investment on Economic Growth: the Portuguese Experience. Theoretical and Applied Economics, XX No. 1(578), 51-62.

World Bank, 2. (2020). Doing Business 2020. License Creative Common Attribution CC: World Bank . Washington DC: World Bank Group.

Trang, D. T.-H., Duc, V. H., Anh, V. T., & Thang, N. C. (2019). Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries. Journal of Risk and Financial Management, 12(176), 1-11.

Page: 
31-38.
Content Status: 
Published