Effects of Foreign Direct Investment (FDI) on Economic Growth in Nigeria

14 Pages Posted: 27 Jun 2013

See all articles by Chinweobo Umeora

Chinweobo Umeora

Anambra State University - Department of Banking and Finance

Date Written: June 26, 2013

Abstract

Foreign Direct Investment (FDI) has been held to provide developing nations including Nigeria with much needed capital for economic growth. Part of the Foreign Direct Investment is the inflow of up to date technology and management skill. This paper investigates the effect of FDI on selected macro economic variables of GDP, inflation and Exchange Rate. It used Ordinary Least Squares (OLS) to examine the relationship between the Dependent variable (FDI) and the independent variables –Inflation and Exchange Rate. The study indicates that GDP, inflation and Exchange Rate are affected to the extent of 46.5% by FDI. FDI does not make the GDP to grow, increases inflation and has negative effect on exchange rate.

Although the study contradicts a priori expectations and popular economic theory of capital, the inflow of FDI into the country is essential. The government should encourage it and pay attention as to its application.

Keywords: Foreign Direct Investment, GDP, Exchange Rate, Inflation, capital flight, low income and developing countries

Suggested Citation

Umeora, Chinweobo, Effects of Foreign Direct Investment (FDI) on Economic Growth in Nigeria (June 26, 2013). Available at SSRN: https://ssrn.com/abstract=2285329 or http://dx.doi.org/10.2139/ssrn.2285329

Chinweobo Umeora (Contact Author)

Anambra State University - Department of Banking and Finance ( email )

Igbariam Campus
Nigeria

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