Impact of Foreign Direct Investment on The Growth of Nigeria’s Economy: (A Case of the Manufacturing Sector 1980-2023)
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Abstract
This study examines the impact of Foreign Direct Investment (FDI) on the growth of Nigeria’s Economy: (A case of manufacturing sector between 1980-2023) using the Ordinary Least Squares method of estimation. Descriptive statistic, trend analysis, ADF unit root were initially prepared. It was indicated that all the variables were stationary at level and first difference I(0) and I(1). The Autoregressive Distributed Lag (ARDL) cointegration revealed that FDI has significant relationship with manufacturing output and inversely related (-2.02E-09) in short-run but positively related (0.00) in the long-run. Exchange rate (-0.04) was negatively related with manufacturing output in short-run but positively related in the long-run (0.19) Inflation rate (0.12) and (0.90) has positive impact of growth of Nigeria’s manufacturing output and statistically significant in the long-run. More so, capacity utilization rate (0.08) and (0.04) was insignificant both in short and long-run ARDL model reparameterized into Error Correction Model (ECM) revealed the long-run equilibrium was corrected in the current period at an adjustment speed of 62%, statistically significant and negatively signed. Based on the findings, it was recommended that the government ought to come up with more pleasant economic policies and business environment, which will attract FDI into virtually all the sectors of the economy. On the issue of corruption and diversion of funds from FDI inflows, agencies established to fight corruption such as Economic and Financial Crimes Commission and Independent Corrupt Practices Commission should be seen to do their jobs to convince both foreigners and nationals that Nigeria is safe for investment. There is need to encourage and accelerate the factors that affect productivity in the manufacturing sector of the country especially manpower and skills for as long as productivity is low, there cannot be a meaningful growth in the manufacturing sector.
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