Abstract
This study examines the effect of foreign direct investment through economic activities on environmental quality of Nigerian economy by using annual data from 1981 to 2020. Our estimation of simultaneous equation model was done through system GMM where we estimate scale, technique and composition effects of foreign direct investment. Our results reveal that foreign direct investment improves economic activities through scale effect and damage the environmental quality through technique and composition effects. The contribution of physical and human capital investment becomes more prominent in attracting direct investment inflow in the country. This however suggests that our institution should be strengthened to ensure adoption of environmental friendly technology in the production process by both local and foreign investors. Also, more investment should be made on physical and human capitals in the country to attract more foreign direct investment.
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