With the advent of the third millennium, the pace of globalization has continued to accelerate. One important economic consequence of globalization for developing countries has been the massive and unprecedented inflows of foreign direct investment during the final decades of the last 20th century.

Indeed, during the last decades of the last century; private capital flows wrested primacy of place from public flows; seizing the pre-eminent position as the source of foreign investment and development finance for developing countries… (Scroll down for the link to get the Complete Chapter One to Five Project Material)



Background of the Study

The progressiveness or retardedness of any economy of the world is anchored on the attainment of sustainable economic growth and development which invariably and undoubtedly depends greatly on the level of foreign investment inflows. Foreign direct investment inflows are the main engine of growth in most newly industrialized economics (NIES) of the world.

At the turn of the present century, privates foreign capital mostly flowed in the form of indirect investments from Europe to underdeveloped countries. Such capital flowed to low-income countries in the 1920s in the form of direct investment mainly into production for export, very little of it went to manufacturing for the home market. But since the Second World War, over half the private investment has been foreign direct investment but has been concentrated mainly in the copper’s electric, energy, etc. Only a small percentage has gone to manufacturing and distribution.

The indispensability of foreign Direct investment to the growth and development of both the developing and developed countries cannot be overemphasized indeed, the massive and unprecedented inflow of foreign direct investment in the last decades of the 20th century is an important economic consequence of globalization and liberation during the period, the penetration, breaking and dismantling of barriers to trade, capital flows across national frontiers have been ubiquitous.

Hence, the growing integration of markets and financial institutions coupled with increased economic integration has indeed been the magnet for foreign direct investment. According to GIWA (1997) in Obardan’s (2004) investment to a depressed economy is just like a blood transfusion to an anemic patient. As Giwa further stressed without investment, Income generation will be the decline as old assets and industries wear out not replaced or renewed.

Investment therefore in every economy can be classified into domestic savings of households, retained profits of business firms, and budget surplus of government and foreign direct investment that is financed from external sources… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

Statement of the Research Problem

In spite of the myriad of incentives created by the government over the years, the performance of a foreign direct investment in Nigeria has not been encouraging in terms of the in-flow rate. The crux of this is to find out the main impact of FDI on Nigeria economy. The statement of the research problem for this study, therefore, arises from questions such as what is foreign direct investment flows; what is the nature of foreign direct investment; what are the available strategies and measures to promote foreign direct investment in Nigeria… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

Research Objective

The key objectives behind this our study is to:

  • Find the relationship between foreign direct investment and Nigeria’s economic growth.
  • Find the impediments of foreign direct investment… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

Significance of the Study

The importance of knowing the major impacts of foreign direct investment in Nigeria cannot be over-emphasized. In this study, it is very important as it would enable policymaker, to examine to what extent certain explanatory variables explained what happens to foreign direct investment in Nigeria and henceforth policymakers will have the foresight to better cushion the unpleasant effects of fluctuations in foreign direct investment inflows in Nigeria… (Scroll down for the link to get the Complete Chapter One to Five Project Material)




This chapter reviews materials written by scholars that are directly and indirectly related to the problem under study. It reviewed journals, thesis, and articles. The reviewed followed the following order; theoretical framework, the impact of FDI on Economic Growth in Nigeria, some stylized facts about FDI in Nigeria, sectoral analysis of FDI inflow in Nigeria, graphical analysis of FDI inflow to Nigeria, empirical literature and the summary of the chapter.

Concept of Foreign Direct Investment in Nigeria

An agreed framework definition of foreign direct investment (FDI) exists in the literature. That is, FDI is an investment made to acquire a lasting management interest (normally 10% of voting stock) in a business enterprise operating in a country other than that of the investor defined according to residency (World Bank, 1996).

Such investments may take the form of either “greenfield” investment (also called “mortar and brick” investment) or merger and acquisition (M&A), which entails the acquisition of existing interest rather than new investment. In corporate governance, ownership of at least 10% of the ordinary shares of voting stock is the criterion for the existence of a direct investment relationship.

Ownership of less than 10% is recorded as portfolio investment. FDI comprises not only a merger and acquisition and new investment but also reinvested earnings and loans and similar capital transfer between parent companies and their affiliates. Countries could be both hosts to FDI projects in their own country and a participant in investment projects in other counties. A country’s inward FDI position is made up of the hosted FDI projects, while outward FDI comprises those investment projects owned abroad.

One of the most salient features of today’s globalization drive is the conscious encouragement of cross-border investments, especially by transnational corporations and firms (TNCs). Many countries and continents (especially developing) now see attracting FDI as an important element in their strategy for economic development. This is most probably because FDI is seen as an amalgamation of capital, technology, marketing, and management… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

Theoretical Framework

Renewed research interest in FDI stems from the change of perspectives among policymakers from “hostility” to “conscious encouragement”, especially among developing countries. FDI had, until recently, been seen as “parasitic” and retarding the development of domestic industries for export promotion.

However, Bende-Nabende and Ford (1998) submit that the wide externalities in respect of the technology transfer, the development of human capital, and the opening up of the economy to international forces, among other factors, have served to change the former image. Caves (1996) observe that the rationale for increased efforts to attract more FDI stems from the belief that FDI has several positive effects… (Scroll down for the link to get the Complete Chapter One to Five Project Material)


PROPONENTS Most analysts believe that national and foreign private-sector enterprises is permitted to operate in a competitive market condition will offer developing countries the best prospects for speedy national economic growth. These analysts, however, do not view multinational capital as a panacea to developing countries. Amongst the proponents of foreign direct investments are Peter Drucker, Harry Johnson, Gerald Mier, Sanjaja Hall, Paul Stricter, Carlos, F, Ludiak, l.A, Manle, .F, Author Nwankwo and many more… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

ANTI-PROPONENTS — some analysts (known as the dependence school) are strongly opposed to pro foreign direct investment perspectives. Their arguments are based on a series of studies and research carried out. Such analysts include Dos Santos, Ronald Multer, Cardoso, Euzo Falleto, Dr. Fashola, and many others… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

Impact of FDI on Economic Growth in Nigeria

There have been some studies on investment and growth in Nigeria with varying results and submissions. For example, Odozi (1995) reports on the factors affecting FDI flow into Nigeria in both the pre and post-Structural Adjustment Programme (SAP) eras and found that the macro policies in place before the SAP were discouraging foreign investors. This policy environment led to the proliferation and growth of parallel markets and sustained capital flight.

Ogiogio (1995) reports negative contributions of public investment to GDP growth in Nigeria for reasons of distortions. Aluko (1961), Brown (1962), and Obinna (1983) report positive linkages between FDI and economic growth in Nigeria. Endozien (1968) discusses the linkage effects were lower than the Chenery-Watanabe average (Chenery and Watanabe, 1958). Oseghale and Amonkhienan (1987) found that FDI is positively associated with GDP, concluding that a greater inflow of FDI will spell better economic performance for the country… (Scroll down for the link to get the Complete Chapter One to Five Project Material)




In this chapter, the researcher attempts to present the method of study analysis in order to extend the empirical evidence in the case of Nigeria. The chapter defines the variables of the study and outlines the sources of data collection and analysis.

Research Design

Research design according to (Onwumere, 2005) is a kind of blueprint that guides the researcher in the investigation; a format that the researcher employs in order to systematically apply the scientific method in the investigation of the problem. Also,  (Asika,  2006),  describes research design as the structuring of investigation aimed at identifying variables and their relationship to one another… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

Population and Sample Size

The population of the study is the entire  Nigerian economy and the data will be drawn from 2015 to 2018.

Specification of Models

The study is largely quantitative and builds on existing research studies and methodologies. In this study, the researcher used some methods to test the hypothesis on the various relationships between Foreign Direct Investment and economic growth. The statistical methods used are the Ordinary Least Squares Method (OLS), Unit root test, the Co-integration test, and the Granger causality test. These methods are used in order to avoid a number of challenges and issues that normally crop up when qualitative methods are used especially in econometric studies. These include the issue of subjectivity and bias of responses and the inability to incorporate such biases in econometric models.


The ordinary least squares method is one of the most popular and widely used methods for regression analysis.  The method was developed by Carl Friedrich Gauss   (1821)   and has subsequently evolved to become the Classical   Linear Regression Model (CLRM).  It is mainly used to establish whether one variable is dependent on another or a combination of other variables.  It entails establishing the coefficient(s) of regression for a sample and then making inferences on the population. The linear regression equation for this model is: (Scroll down for the link to get the Complete Chapter One to Five Project Material)


  • Unit Root Test

It is suggested that when dealing with time-series data, a number of econometric issues can influence the estimation of the parameter using OLS. Regressing a time series variable on another time series variable using Ordinary Least Square (OLS) estimation can obtain a very high R2, although there is no meaningful relationship between the variables (Gujarati, 2018).

This situation reflects the problem of spurious regression between totally unrelated variables generated by a   non- stationary process. Therefore, it is recommended that a stationarity (unit root) test be carried out to test for the order of integration. For this study, the unit root test that was employed is the   Augmented   Dickey-Fuller   (ADF)   test and it was performed with EViews software… (Scroll down for the link to get the Complete Chapter One to Five Project Material)


This chapter summarizes the various research findings that were made from the study and supports them with the objectives of this research. Conclusions and recommendations were therefore made based on these findings.

  • Conclusion

As one of the empirical studies on the analysis of Foreign  Direct Investment and economic growth in Nigeria, this study has made an attempt to understanding the relationship and interaction between them. The proxy for economic growth used in this study was the gross domestic product. It focused on the period 2015 to 2018 and used time-series data obtained from the  CBN,  World  Bank, and Federal  Office of Statistics.    Some statistical methods;    Ordinary    Least    Squares,    Unit root, Cointegration, and the Granger causality test were used to test for correlation and direction of causality… (Scroll down for the link to get the Complete Chapter One to Five Project Material)

  • Recommendations

Based on the foregoing findings and conclusions emanating from this study, the following recommendations were made:

  • There is a need for domestic actions that involve actions to be taken by policymakers in the country. These include image building (re-branding Nigeria), domestic regulatory reforms, and marketing of investment
  • Image building: Improving the currently bad image of the country is the key to reversing the dismal FDI trend of the country and Africa at large. This requires an increase in Political stability, Macroeconomic stability, and the protection of property rights as well as the rule of law… (Scroll down for the link to get the Complete Chapter One to Five Project Material)



Ahmed A.       (1993) Strategies for foreign investment in Nigeria. A central Bank perspective Economic and Financial Review volume 26.

Adelegan, J.O. (2000). “Foreign direct investment and economic growth in Nigeria: A seemingly unrelated model”. African Review of Money, Finance and Banking, Supplementary issue of “Savings and Development” 2000. pp.5–25. Milan, Italy.

Aitken, B., G.H. Hansen, and A. Harrison. (1997). “Spillovers, foreign investment and export behavior”. Journal of International Economics, 43: 103–32.

Aitken, B., A.E. Harrison, and R. Lipsey. (1999). “Do domestic firms benefit from the foreign direct investment?” American Economic Review, 89: 605–18.

Ajayi S. I.        (1992)    An Economic Analysis of Capital flight from Nigeria: World Bank Working Paper Series No 993.

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Asiedu, E. (2001). “On the determinants of foreign direct investment to developing countries: Is Africa different?” World Development, 30(1): 107–19.

Asiedu, E. (2003) “Capital controls and foreign direct investment”. World Development, 32(3): 479–90.

Asiedu, E. (2005). Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institution, and Political Instability. UNU/WIDER Research Paper 2005/24. World Institute for Development Economics Research, Helsinki.

Arthur, Nwankwo (1981) Can Nigeria survive the 4th dimension publication.  Enugu.

Ayanwale, A.B., and A.S. Bamire. (2001). The Influence of FDI on Firm-Level Productivity of Nigeria’s Agro/Agro-Allied Sector. Final Report Presented to the African Economic Research Consortium, Nairobi.

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