The Impact of Foreign Direct Investment on the Nigerian Economy : Current School News

The Impact of Foreign Direct Investment on the Nigerian Economy



The Impact of Foreign Direct Investment on the Nigerian Economy.


Most economic rationales for granting special incentives for attracting FDI are based on the belief that FDI bridges the “idea gap” between the rich and the poor nations in addition to the generation of technological transfers and spillovers. Empirical Literature however finds controversial, the effect of FDI on productivity growth.

This study is an investigation into the impact of FDI on the Nigerian economy. Using secondary data obtained from CBN Statistical Bulletin and National Bureau of Statistics, Ordinary Least Square regression techniques were employed in the analysis. Major findings show that FDI has a significant positive impact on the Nigerian economy.

It is recommended among others that government should enhance its economic climate and increase the incentives to attracting more FDI flows to the economy. It is suggested that further studies should explore the impact of each of the determinants of FDI on the economy.


One of the most salient features of today’s globalization drive is conscious encouragement of cross-border investment, 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. Sub-Saharan Africa as a region now has to depend very much on FDI for so many reasons, some of which are amplified by Asiedu (2001). The preference for FDI stems from its acknowledged advantages (Sjoholm 1999; Obwona, 2001, 2004).

The efforts by several African countries to improve their business climate stem from the desire to attract FDI. In fact, one of the pillars on which the New Partnership for Africa’s Development (NEPAD) was launched was to increase available capital to US$64 billion through a combination of reforms, resource mobilization and condusive environment for FDI (Funke and Nsouli, 2003).

Unfortunately, the efforts of most countries in Africa to attract FDI have been futile. This is in spite of the perceived and obvious need for FDI in the continent. The development is disturbing, sending very little hope of economic development and growth for these countries.


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, ltaly.

Ahmed, A. 1998. “Strategies for foreign Investment in Nigeria: A CBN perspective”. Economic and Financial Review; vol. 26. No. 1 March.

Akinlo, A.E. 2004. “Foreign Direct Investment and Growth, in Nigeria: An empirical Investigation” Journal of Policy Modeling, (26)5:627-639

Aluko, S.A. 1961. “Financing economic development in Nigeria”. The Nigerian Journal of Economic and Social Studies, 3(1): 39-67.

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

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

CSN Team.

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