Abstract
This study sets out to examine the role of manufacturing sector Foreign Direct Investment (FDI) in the quest for export sector diversification in Nigeria for sustainable development. This objective was achieved by estimating the effects of manufacturing sector FDI on manufactured goods export from Nigeria using the Autoregressive Distributed Lag estimating technique. The study discovered that FDI inflows into the country’s manufacturing sector impacted negatively on manufactured exports in the short run. The short run result nevertheless gave way to a positive and significant influence of FDI on manufactured exports in the long run, indicating that this form of foreign capital is important for manufactured export promotion in Nigeria. The resulting long run positive FDI- spillovers on export performance in Nigeria is in tandem with the neoliberal theoretical viewpoint that developing countries can rely on FDI as ladder to sustainable development. The findings suggest that sustainable development can be enhanced in Nigeria by exploiting the channel of positive spillovers from sector specific FDI inflows. The study concludes that with appropriate policy stance, one important way of pursuing the long run goal of sustainable development is to route FDI inflows in the direction of the country’s manufacturing sector.
Highlights
The classifications of most economies are patterned majorly after the level of industrialization within each economy
Replacing non-oil exports with manufactured exports (MEX), we employ a model that takes into consideration some trade reform indicators which include real exchange rate (RER), trade liberalization (TLI), and external market access (MKT) in addition to manufacturing foreign direct investment (MFDI)
Data on market (MKT) and manufacturing foreign direct investment (MFDI) have been transformed into their logarithm form before been applied for analysis; while the data for manufactured exports (MEX), Trade Liberalisation (TLI) and real exchange rate (RER) remained in their original percentage forms
Summary
The classifications of most economies are patterned majorly after the level of industrialization within each economy. There are two major, but conflicting, explanations of industrial development through the channel of foreign direct investment (FDI). The first, which is the structuralist theory, prescribes import substitution industrialisation with a malign view of foreign direct investment (FDI), while the neoliberal perspective on the other hand, recommends export- oriented industrialisation with a strong benign opinion on FDIdevelopment impact. When neoliberal development thought outpaced structuralism, and tilted the stock of development literature in favour of globalization, conventional wisdom shifted towards the view that FDI was good for development. This implies that FDI can be seen as a major instrument for industrialising any economy. With dwindling official resource flows to assist the process of economic development, many developing countries had to embrace neoliberal policy prescriptions, embarked on capital account liberalisation, and turned to foreign private resources in order to fill the resource gap in their quest for economic development, which understandably begins with industrialisation
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