FOREIGN DIRECT INVESTMEN AND POVERTY REDUCTION IN NIGERIA
Abstract
This study examines the effect of foreign direct investment (FDI) on poverty reduction in Nigeria over the period 1991 to 2022. The specific objectives were to: (i) investigate the relationship between FDI and poverty alleviation; (ii) assess the role of official development assistance (ODA) in poverty reduction; and (iii) examine the impact of trade openness on poverty reduction in Nigeria. The study adopted an ex post facto research design and utilized secondary time-series data sourced from the World Bank, Central Bank of Nigeria bulletins, and the National Bureau of Statistics. Descriptive statistics, correlation analysis, and ordinary least squares (OLS) regression techniques were employed to analyze the data, supplemented by unit root tests and cointegration tests to examine stationarity and long-run relationships.
The findings reveal that external debt stock has a negative and significant effect on Nigeria's economic growth (GDP), while external debt service payments have a negative but insignificant effect. The exchange rate showed a positive and significant impact on GDP, whereas inflation had a negative and significant effect. With respect to FDI and poverty, the study found that FDI inflows have contributed to economic growth, but the poverty-reducing effect remains mixed and conditional on absorptive capacity, institutional quality, and the investment climate. ODA showed limited direct impact on poverty reduction, while trade openness demonstrated potential for poverty alleviation through enhanced market access and economic linkages.
The study concludes that while FDI can serve as a catalyst for poverty reduction in Nigeria, its effectiveness depends on complementary factors such as stable macroeconomic policies, improved infrastructure, security, and human capital development. It is recommended that the Nigerian government strengthen institutional frameworks, diversify the economy beyond oil, enhance security to attract sustainable FDI, and ensure that FDI inflows translate into tangible poverty-reducing outcomes through job creation, technology transfer, and linkages with local enterprises.
**Keywords:** Foreign Direct Investment, Poverty Reduction, Official Development Assistance, Trade Openness, Economic Growth, Nigeria
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