Fdi and Nigeria Ecenomy
Current Research Journal of Economic Theory 4(3): 53-66, 2012 ISSN:2042-485X © Maxwell Scientific Organization, 2012 Submitted: November 01, 2011 Accepted: November 25, 2011
Published: June 30, 2012
Foreign Direct Investment and Economic Growth in Nigeria: An Analysis of the Endogenous Effects
Okon J. Umoh, 2Augustine O. Jacob and 1Chuku A. Chuku 1 Department of Economics, University of Uyo, Uyo, Nigeria 2 Heritage Polytechnic, Eket Akwa Ibom State, Nigeria
Abstract: This research endeavour set out to empirically investigate the relationship between foreign direct investment and economic growth in Nigeria between 1970 and 2008. The paper makes the proposition that there is endogeniety i.e., bi-directional relationship between FDI and economic growth in Nigeria. Single and simultaneous equation systems are employed to examine if there is any sort of feed-back relationship between FDI and economic growth in Nigeria. The results obtained show that FDI and economic growth are jointly determined in Nigeria and there is positive feedback from FDI to growth and from growth to FDI. The overall policy implication of the result is that policies that attract more foreign direct investments to the economy, greater openness and increased private participation will need to be pursued and reinforced to ensure that the domestic economy captures greater spillovers from FDI inflows and attains higher economic growth rates. Keywords: Economic growth, endogeniety, FDI, Nigeria, three stage least square INTRODUCTION Over the last four decades, the macroeconomic performance of Nigeria can be described as being chequered. The average GDP growth rate of 3.95% achieved between 1970 and 2008 translates into a low growth rate of 1.49% in per capita income terms. This rate of growth in per capita income is insufficient to reduce in a significant way, the level of poverty which remains the primary goal of development policy in Nigeria. Ajayi (2006) notes that the savings rate in
Published: June 30, 2012
Foreign Direct Investment and Economic Growth in Nigeria: An Analysis of the Endogenous Effects
Okon J. Umoh, 2Augustine O. Jacob and 1Chuku A. Chuku 1 Department of Economics, University of Uyo, Uyo, Nigeria 2 Heritage Polytechnic, Eket Akwa Ibom State, Nigeria
Abstract: This research endeavour set out to empirically investigate the relationship between foreign direct investment and economic growth in Nigeria between 1970 and 2008. The paper makes the proposition that there is endogeniety i.e., bi-directional relationship between FDI and economic growth in Nigeria. Single and simultaneous equation systems are employed to examine if there is any sort of feed-back relationship between FDI and economic growth in Nigeria. The results obtained show that FDI and economic growth are jointly determined in Nigeria and there is positive feedback from FDI to growth and from growth to FDI. The overall policy implication of the result is that policies that attract more foreign direct investments to the economy, greater openness and increased private participation will need to be pursued and reinforced to ensure that the domestic economy captures greater spillovers from FDI inflows and attains higher economic growth rates. Keywords: Economic growth, endogeniety, FDI, Nigeria, three stage least square INTRODUCTION Over the last four decades, the macroeconomic performance of Nigeria can be described as being chequered. The average GDP growth rate of 3.95% achieved between 1970 and 2008 translates into a low growth rate of 1.49% in per capita income terms. This rate of growth in per capita income is insufficient to reduce in a significant way, the level of poverty which remains the primary goal of development policy in Nigeria. Ajayi (2006) notes that the savings rate in