ABSTRACT

Foreign Direct Investment (FDI) plays an important role in the growth of an economy; the growth of international production is driven by economic and technological forces and also driven by the ongoing liberalization of foreign direct investment and trade policies. During the past two decades, foreign direct investment (FDI) has become increasingly important in the developing world, with a growing number of developing countries succeeding in attracting substantial and rising amounts of inward FDI (Khaliq and Noy, 2007). Economic theory has identified a number of channels through which FDI inflows may be advantageous to the host economy yet, the empirical literature has lagged behind and has had more difficulty identifying these advantages in practice. Hence, many studies have attempted to find out the relationship between foreign direct investment and economic growth; and in most cases, a positive relationship has emerged. This research, therefore tests for the impact of foreign direct investment on economic growth in Nigeria. The study was done with the Ordinary Least Square (OLS) method using annual data from 1980 to 2015. The study found that there is a positive relationship between foreign direct investment and economic growth in Nigeria. The ADF unit root test showed that all the variables are stationary at level form. The research result supports the classical perspective that there exist a positive relationship between foreign direct investment and economic growth. One of the major findings of the study is that foreign direct investment can be a factor to boost economic growth in Nigeria. A foremost recommendation of study is that government should try as much as possible to create a fertile environment for investment so as to attract foreign investors. The policy if rightly implemented promises to increase in economic growth.