Research Journal of Economics

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Effect of Foreign Direct Investment on Nigerian Economy

Foreign direct investment has always been acknowledged as one of the sources of economic growth of a country as it has been noted to have a positive and significant relationship with economic growth. However, the FDI inflow and the economic growth of Nigeria seem to be operating inversely in the current decade. This study examines the impact of foreign direct investment in the economic growth of Nigeria between 2007 and 2017 as it is believed that the impact of FDI is location and period-specific. Regression analysis was carried out using time series secondary data. The model specification for the regression analysis was derived from the Solow growth model. The results of the analysis revealed all independent variables having a positive relationship with economic growth for the scope of the study but with only FDI being statistically insignificant to the economic growth of the country during the period. The R2 of the model was 0.96 implying that 96% of the variations in economic growth can be explained by the model. The study, therefore, recommends that to make sure foreign direct investment trickle down Nigeria’s economy; the flow of FDI into the economy has to be monitored and influenced to direct it into sectors that need massive investment in the country such as the Agricultural sector which has been noted over the years for its failure or inability to attract foreign direct investment and whereas the sector is the first point of contact if Nigeria is to enjoy
sustained economic growth.

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