Donnish Journal of Economics and International Finance

October 2017 Vol. 3(2), pp. 137-145

Copyright © 2017 Donnish Journals

Original Research Paper

The Relationship between Foreign Direct Investment and Selected Economic Indicators in Nigeria: A Causality Approach

D.I. Ekine¹, AJIE, Charity Ogorchukwu² and OJIYA, Emmanuel Ameh³*

¹Department of Agriculture, Applied Economics and Extension, Faculty of Agriculture, Rivers State University, Port-Harcourt, Nigeria.
²Institute of Niger-Delta Studies,University of Port-Harcourt, Nigeria.
³Lecturer, Department of Economics, Federal University Wukari, Nigeria.

Author's Email: ojiyaenoch2000@gmail.com

Accepted 28th September, 2017

Abstract

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Developing countries like Nigeria face capital shortages that put a limit on investment and therefore growth, which can be balanced with an inflow of funds from abroad. It is in the light of this challenges that this study is undertaken to empirically examine the relationship between Foreign Direct Investment and Selected Economic Indicators in Nigeria. The study covered the period 1986 to 2016 and used secondary data derived from the World Bank Development Indicators (WBDI) 2016. The paper employed Augmented Dickey-Fuller technique in testing the unit root property of the series; Johansen cointegration approach in examining the long-run relationship among the series in the model and Granger causality test of causation between the variables, with an ECM technique in testing the long run adjustment speed of the model. Findings from the study concluded that a unique long-run relationship existed between the dependent and independent variables at the 5% significance level during the period referenced. Major findings of the study are to the effect that the rising unemployment levels were a consequence of low output from the manufacturing sub-sector within the period. Based on findings from the study, it was recommended that the government should improve the state of infrastructures in the country as well as improve on the security of citizens and visitors alike as the present state of fear created by widespread kidnapping, robbery and acts of terrorism in different parts of the country are inimical to investment drive. Finally, our political and economic managers must learn to speak positively about the economy. The penchant to de-market our economy by painting it as corrupt sends a clear negative signal to investors willing to invest in such an economy as they feel unsafe in such an environment.

Keywords: FDI, Investment, Gross Domestic Product per capita, Unemployment, Granger Causality.

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Cite This Article:

D.I. Ekine, AJIE, Charity Ogorchukwu and OJIYA, Emmanuel Ameh. The Relationship between Foreign Direct Investment and Selected Economic Indicators in Nigeria: A Causality Approach. Donnish Journal of Economics and International Finance 3(2) 2017 pp. 137-145.