Industrial output growth and foreign direct investment in Nigeria

Abstract

This research study investigated the nexus between industrial output growth and foreign direct investment in Nigeria. It is a common belief that no nation is an island on its own; hence countries around the globe interchange economic activities across borders via various mutual business indentures. Notably, despite Nigeria’s foreign direct investment level in Africa, the country’s industrial output growth still falls short in recent years. Therefore, it is pertinent in this study to unravel why increasing Foreign Direct Investment inflow brings about slow industrial output growth in Nigeria. Interestingly, Autoregressive Distributed Lags (ARDL) and Cointegration and Error Correction Mechanisms (ECM) techniques and diagnostics checks were adopted to investigate whether there is long-run interaction between industrial  output growth and foreign direct investments in Nigeria. Notably, post estimations tests were carried out to ascertain the validity of the models adopted in the study. The study showed a short-term and long-term relationship between Foreign Direct Investment and Industrial Output Growth in Nigeria. Therefore, FDI disclosed a negative time-path link with industrial output growth in Nigeria. This asserts that Nigeria's current slow output growth contradicts expected economic intuitions due to a negative link between FDI and industrial output growth, all things being equal. Consequently, the study recommended that a proactive policy framework could be used to promote industrialization via localization of industry across Nigeria. Also, policymakers should adopt protectionist international trade laws to expand the local productivity base.