The impact of FDI and non-oil exports on economic growth in Nigeria (PDF)

Scientific Study from the year 2018 in the subject Economics - International Economic Relations, , language: English, abstract: The controversy surrounding the impact of FDI and non-oil exports on economic growth and the dynamic interactions of these economic variables in Nigeria motivated this study.

Empirical studies have found divergent views on the effect of FDI and non-oil exports on economic growth in the country. However, in achieving the objectives of this study, the author employed the dynamic OLS and VARS modeling to analyze the relationship between FDI, non-oil exports and economic growth in Nigeria during the period of 1980 to 2016. In testing for the time series properties, the evidence from estimated economic models suggests that all the variables examined are stationary at first difference I(Is) using the Augmented Dickey- Fuller (ADF) and Phillips-Perron. Also, Johansen Co integration test reveals that the variables are co integrated which confirms the
existence of long-run equilibrium relationship among the variables. The study reveals that the impact of FDI on the economic growth was significant and as a unit increase in FDI impacted positively by 64% on the productive capacity of goods and services in Nigeria during the period.

Meanwhile, reverse is the case for non-oil exports. In addition, the interactions among FDI, nonoil exports and economic growth appear very weak and do not follow a predictable pattern in Nigeria: that foreign direct investment should lead to improvement in non-oil exports and eventually expand the frontier of economic growth. This suggests that there are some structural rigidities in the economy that are preventing the impact of non-oil exports from being fully felt by the economy, particularly through economic growth channel. This further reinforces the presence of some institutional factors that create inherent problems in the economy that could frustrate any valid and sincere investment policies formulated by the government.

Therefore, the study recommends that the policy makers need to create friendly economic policies and business environment that will boost further attraction of FDI into all sectors of the economy and the economy must be diversified as well towards non-oil sector in order to ensure maximum contributions from this sector to economic growth of Nigeria in the nearest future.