Foreign Direct Investment and Economic Development in Nigeria

This study examined the role of foreign direct investment in the economic development process of Nigeria. Specifically, the study focused on the impact of foreign direct investment on economic development, proxy by human development index (HDI). The constructed model included other factors that affect economic development such as trade openness, government expenditure and inflation. Annual data from 1990 to 2020 was used for the study and sourced from the United Nation Development Report (UNDR), United Nations Conference on Trade and Development (UNCTAD), World Development Indicator (WDI) and Central Bank of Nigeria (CBN) Statistical Bulletin. In estimating the economic development model, unit root, autoregressive distributed lag (ARDL) and Toda and Yamamoto methods were employed. The result indicated that foreign direct investment had negative and significant impact on economic development. Similar relationship was established between trade openness and economic development. These results were supported by the Toda and Yamamoto result as there was no evidence of causality relationship between foreign direct investment and economic development. To reverse this negative impact of foreign direct investment, this study recommends that basic infrastructure should be provided by the government as this will boost real sector activities and appropriately redirect foreign direct investment inflow away from extractive sector to the productive sectors of the Nigerian economy.