The impacts of Foreign Direct Investment (FDI) and Oil export on Economic growth in Nigeria from 1970 -2011.

Abstract

The study examines the impacts of Foreign Direct Investment (FDI) and Oil export on Economic growth in Nigeria from 1970 through 2011. The Augmented Dickey Fuller (ADF) unit root test was adopted to determine the stationary properties of the data, while the order of integration of the data was tested using the Johansen Co-integration test. The co-integration result produce two co-integrating equations, which confirms the existence of long-term relationship among the variables- Gross Domestic Product (GDP) and Foreign Direct Investment (FDI,) Oil Export, Exchange rate Inflation as well as Trade Openness.  Also the ordinary Least Square (OLS) or short run regression analysis result shows that 87 percent of total changes in economic growth are explained by the explanatory variables. Equally the F-test/statistic value of 50.58807 shows that the model or equation has a good fit, which signifies that the exogenous variables are good explainers of changes in economic growth in the Nigerian economy. The t-statistic shows that foreign direct investment is not statistically significant in explaining the level of economic activities as a result of non-conducive environment for investment as well as oil theft. The negative value of the t-statistic on oil export could be explained by the fact that part of the oil exported are for refining abroad and later imported for domestic consumption. Premised on the above the study recommends that there should be improvement of institutions, economic and social infrastructure, so as to attract cross boarder investment. Also required is improvement of code of conduct on foreign direct investment to limit the repatriation of profits, which will ensure reinvestment, and increase the volume/value of FDI in Nigeria. In addition domestic investors/investment should be encouraged especially down stream of the oil sector, to increase the level of employment  and economic activities. Policy makers should appreciate the effects of lag, in order to ensure appropriateness and consistency, in the implementation of policies.                            

Keywords: Foreign direct investment, Crude oil, oil export, economic growth co-integration, Augmented Dickey Fuller