Foreign Direct Investment, Domestic Investment and Economic Growth in Nigeria (1986 - 2013)


  • Department: Economics
  • Project ID: ECO0710
  • Access Fee: ₦5,000
  • Pages: 84 Pages
  • Reference: YES
  • Format: Microsoft Word
  • Views: 1,413
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The broad objective of this study is to examine the impact of foreign direct investment and domestic investment on economic growth in Nigeria for the period of 1986 to 2013. To achieve the broad objective, the following specific objectives were raised:(i) Analyse the trend of foreign direct investment, domestic investment and economic growth in Nigeria; (ii) examine the relative impact of foreign direct investment and domestic investment on economic growth in Nigeria; and (iii) investigate the causal relationship between foreign direct investment, domestic investment and economic growth in Nigeria. To achieve the above objectives, chapter one provided the background of the study by properly identifying the research problem from which the research questions and research objectives were raised and justification for the study was provided accordingly. Chapter two presented the various theoretical perspectives underlying the research study and also identified the gaps in existing literature. The review showed that studies have observed the effect of foreign direct investment, domestic investment on economic growth but their findings have been quite controversial. The role of capital formation or investment in the economy has been pointed to be a vital one as many development theories are pointers to the extent of importance both human and physical capital. Thus how foreign direct investment and domestic investment affect economic growth in Nigeria remains a topical issue of concern. In chapter three, the research methodology was specified. The study adopted the endogenous growth theory of a simple ‘AK’ model was used to build the empirical model. The empirical model was estimated using the Error Correction Model (ECM) model. The chapter four presents the descriptive analysis of foreign direct investment and domestic investment adequacy in Nigeria from 1986 to 2013. The trend pattern and analysis was examined and the results from the graph examining the relationship between the three variables shows that FDI and DI has effect and a long run impact on the economic growth of Nigeria as the GDP is seen to rise steadily in the years which the FDI and DI moved also steadily together and in about the sixth or seventh year when the FDI and DI diverged, the GDP began to experience distortion and a sharp fall. Also, the unit root tests showed that all the variables with the exception of real gross domestic product are integrated of order one, but RGDP was integrated at levels, suggesting that the variables are I (1) series. The Johansen Integration test also confirm that there is at least one cointegrating relationship among the variables included in the model to examine the determinants of foreign direct investment and domestic investment in Nigeria. Specifically the result of cointegration test suggests that four of the six macroeconomic variables used in the model, irrespective of the ways they are ordered have long run equilibrium relationship. This evidence of cointegration among the variables rules out spurious correlation and implied that at least one direction of influence could be established among the variables. The error correction estimate is used to determine the explanatory variables with the highest explanatory power on the determinants of foreign direct investment, domestic investment and economic growth in Nigeria. The study shows that the coefficient of domestic investment (DI) is a major determinant. The Pairwise Granger Causality test was also used to check the direction of causality between the two variables, and it was found that both FDI and DI have a bi-directional relationship with GDP.

  • Department: Economics
  • Project ID: ECO0710
  • Access Fee: ₦5,000
  • Pages: 84 Pages
  • Reference: YES
  • Format: Microsoft Word
  • Views: 1,413
Get this Project Materials
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