Journal of Economics and Development Studies

The Nature of Foreign Direct Investment and Its Impact on Sustainable Economic Growth in Nigeria
Lawrence Ehikioya Imoughele, Mohammed Ismaila

Abstract
Most countries strive to attract Foreign Direct investment (FDI) because of its acknowledged advantage as a tool of economic development. Nigeria joined the rest of the world in seeking FDI as it help to arguments domestic resources of the economy and enhanced economic growth and development as evidenced by the kind of government policies intervention into the development of the economy. The study investigates the impact of components of inflow of FDI on the Nigerian economy for the period which spanned between 1986 and 2009. The objectives of the study lies in the separation of the impact of FDI on economic growth in terms of sector and sub sectors of the Nigerian economy because most others studies examine the aggregate impact of FDI on the Nigeria economic growth. The trend analysis reveals that FDI inflow to the Nigerian economy is dominated by foreign investor from Western Europe which is highly concentrated on the manufacturing sector. The study used co-integration and Error Correction Mechanism (ECM) to determine the relationship between FDI, its components and economic growth. The study found that continuous inflow of foreign direct investment in manning and quarrying, telecommunication, building and construction, trading and business and agricultural sectors have a robust impact on Nigeria’s economics growth. The study recommended among others that there is need for government to consciously improve the business environment by conscious provision of necessary infrastructure, which will lower the cost of doing business in Nigeria and adequate macroeconomic policies that will open up the economy should be put in place to encourage foreign direct investment inflow and make Nigeria an export platform, where export commodities could be manufactured for established international market, this will help to Strengthen Nigeria’s Balance of Payment position (BOP).

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