A Critical Assessment of the Nexus between Foreign Direct Investment and Economic Growth in the Nigerian Context

Abstract

Foreign Direct Investment (FDI) is the interaction of the rest of the world with a domestic economy. These interactions influence economic growth, depending on a number of determinants, such as: foreign trade policy, corruption, security, form and system of government, exchange rate, monetary and fiscal policy, economic equipment, infrastructure and availability of human capital, etc. The amount of FDI a sector will attract will be empirically determined, and its importance to the country will go a long way in determining the country's focus on continued economic growth. This study examined the impact of FDI on Nigeria's economic growth. The study focused on two key variables, namely FDI inflow and Nigeria's economic growth. Economic growth, the independent variable, is represented by three substitutes; Gross domestic product, gross investment and labor productivity. The investigation period extended from 2010 to 2019. In this study, the correlative research design was chosen. Descriptive statistics, Pearson's correlation, and regression analysis with SPSS 23 were used to analyze the secondary data collected from the National Bureau of Statistics’ Reports. The study found out that FDI has a negative but insignificant association with Nigeria's economic growth. The study, therefore, made the following recommendations: the government should encourage economic growth through start-ups, entrepreneurship and innovation; Nigeria should invest and accumulate knowledge, human/physical capital and promote the adoption of technologies; finally, domestic savings should be mobilized by the government through tax cuts, job creation, and improving the financial system to increase capital formation.