Abstract

The study examined effect of foreign direct investment on economic growth in Nigeria during the period 1997 to 2018. It adopted ex post facto research design because the data used is in existence. Data were extracted from Central Bank of Nigeria statistical bulletin. Based on the specific objectives, and research questions two research hypotheses were raised. The study conducted augmented DickeyFuller unit root test and found that foreign direct investment and real gross domestic product were stationary and integrated at first difference while per capital income was stationary and integrated at second difference. The study therefore used Johansen co-integration to estimate the relationship between foreign direct investments and real gross domestic product while ARDL Bounds test for the relationship between foreign direct investments and per capital income. The study established that foreign direct investment has positive insignificant relationship with real gross domestic product on the short run while on the long run foreign direct investment has positive significant relationship with real gross domestic product economic growth of Nigeria. It also established that there exist positive significant relationship between foreign direct investments and per capital income and there is long run relationship between foreign direct investment and per capital income of Nigeria. It further found that foreign direct investment has significant effect on percent change in real gross domestic product of Nigeria and there is significant effect of foreign direct investment on per capital income in Nigeria and concluded that foreign direct investment has significant effect on economic growth of Nigeria. It therefore recommended that government should ensure that incentives are given to attract foreign investors invest in specific sector such as manufacturing to enhance economic growth of the country and foreign direct investments should be encouraged to invest in the real sector so as boost per capita income