IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN NIGERIA (1999-2024)
Abstract
This study investigates the impact of Foreign Direct Investment (FDI) on economic growth in Nigeria over the period 1999–2024. Using annual time-series data sourced from the World Bank World Development Indicators, the study applies the Autoregressive Distributed Lag (ARDL) Bounds Testing approach to assess both short-run and long-run relationships between GDP and key macroeconomic variables including FDI, Gross Capital Formation (GCF), inflation, exchange rate, and trade openness. The results indicate a significant long-run positive relationship between FDI and economic growth, with supporting contributions from GCF and trade openness. Conversely, inflation and exchange rate volatility negatively affect GDP. The error correction term suggests that deviations from long-run equilibrium are corrected by 68% annually. Diagnostic tests confirm the model’s reliability and robustness. The findings highlight the importance of creating a stable macroeconomic and institutional environment to enhance the effectiveness of FDI. The study recommends policy reforms focused on infrastructure development, trade facilitation, inflation control, and investor protection to harness FDI’s full growth potential.
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