A Multi-Sectoral Analysis of Effects of Foreign Direct Investment on Nigeria’s Output Growth
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This research work examined the Multi-Sectoral Analysis of effects of Foreign Direct Investment on Nigeria’s Output Growth ranging from 1990-2020, covering a period of 30 years. Foreign Direct Investment (FDI) is undoubtedly a key source of external capital to many emerging economies. Nigeria is one of the renowned destinations for FDI in Africa. Inflows of FDI in Nigeria are not significant when compared to some other developing countries. This research explores issues pertaining to sectoral allocation of FDI in the major sectors of the Nigerian economy. Technically, it focused on the effect of FDI on Nigeria’s sectoral output growth. Foreign Direct Investment Proxied as FDI is the explanatory variable while Interest Rate proxied as INTR and Exchange Rate as EXR are the control variables while Mining & Quarrying (MQGDP), Manufacturing & Processing (MPGDP), Agricultural Sector (AGGDP), Information & Communication (ICGDP) Output are the dependent variables. The central objective of this research work is to determine the effect of FDI inflows, on Mining & Quarrying (MQGDP), Manufacturing & Processing (MPGDP), Agricultural Sector (AGGDP), Information& Communication (ICGDP) Output and also Interest Rate and Exchange Rate as control Variables. It employed the use of secondary and time series data using statistical tool such as Auto Regressive Distributive Lag (ARDL), Augmented Dickey Fuller unit root to test for the stationarity of the Data, Johanson Co-integration to test for long-run equilibrium relationship that exist among the variables under study. The p.value of FDI on MQGDP, MPGDP, AGGDP, ICGDP are 0.3767, 0.5846, 0.3155, 0.8498and effect of INTR on MQGDP, MPGDP, AGGDP, ICGDP are 0.8015, 0.7097, 0.9200, 0.8426 and effect of EXR on MQGDP, MPGDP, AGGDP, ICGDP are 0.4172, 0.9330, 0.5513, 0.1755 respectively showing that none is significant. The result shows that FDI, INTR &EXR impacted positively on the output growth of MQGDP, AGGDP & ICGDP while, only FDI impacted positively on MPGDP with INTR & EXR exerting negative effect on it. Based on the findings, the study recommends amongst others that government should encourage the inflow of more FDI into the various sectors by creating an enabling environment and formulating strategic socio-economic policies that will enhance the ease of doing business in Nigeria and boost investor’s confidence.
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