Empirical analysis of the effects of foreign direct investment inflows on Nigerian real economic growth: Implications for sustainable development goal-17

Abstract

Existing literature in modern macroeconomics is saturated with various studies on both the short and long run link between foreign direct investment (FDI) and economic growth in Nigeria, and other emerging market economies. However, there are areas of knowledge gap on the part of the effects of industrial linkage on FDI inflows to the Nigerian economy. As a result of this knowledge gap and growing concern for commitments to investment promotion and sustainable industrial development in the country, it is imperative at this time to assess the effects of FDI on Nigeria’s real sector growth. Consequently, this study set out to empirically examine the effect of FDI inflows into Nigeria on real gross domestic product (RGDP) growth and how these external inflows can bring about achieving Goal-17.3 of mobilising additional financial resources for developing countries from multiple sources. The model constructed was estimated using the robust GMM estimation technique which took care of the problem of endogeneity and autocorrelation inherent in ordinary least square. The study found that labour quality has a positive and significant effect on RGDP in line with theory. Equally, it was noted that capital intensity displayed a significant negative effect on RGDP in Nigeria. This study therefore recommends that policy makers in Nigeria should incorporate into her broad policy, improvement in capital intensity as a bedrock to growing the economy through FDI spillover effects.