Foreign Direct Investment, Financial Development and Economic Growth in Nigeria
No Thumbnail Available
Date
2023-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The study explores how FDI inflows impact the Nigerian economy and the interplay between FDI, financial development, and economic growth using secondary annual time series data from 1981 to 2021. The ARDL was used as the estimation method. The findings show that FDI has a negative and significant impact on economic growth in the short run, while the long run reflects a positive and significant effect. Among financial development indicators, it was found that in the short run the first lag of financial access has a positive significant effect on FDI inflows, financial stability has a negative and statistically significant effect, the first lag of financial depth has a negative and significant effect, while financial efficiency (BLD) has a positive and significant effect on FDI inflows in Nigeria. In the long run however, only financial efficiency and financial stability were found to have a positive and negative significant effect respectively on FDI inflows in Nigeria. Assessing the interaction of these financial development indicators interact with FDI, it was found that the effect of the interaction of Financial depth and FDI on economic growth is positive both in the long run and short run, while that of Financial access and FDI revealed a positive effect on economic growth which is similar to the interaction of Financial stability and FDI on economic growth which was also found to be positive in the short run. Meanwhile, in the long run, the interaction of financial efficiency and FDI on economic growth was found to be negative. It was therefore concluded that FDI has a positive impact on economic growth and that financial development indicators are critical factors that affect economic growth in Nigeria. The study suggest that policymakers should focus on enhancing financial development indicators to complement FDI and boost economic growth.
Keywords: Financial Development, Foreign Direct Investment, Economic Growth
Word Count: 300
Description
Keywords
Financial Development, Foreign Direct Investment, Economic Growth
Citation
Kate Turabia