Impact of Foreign Direct Investment on Economic Growth in Nigeria: Moderating Role of Governance
Year: 2025
Type: article
Abstract: Nigeria has attracted significant Foreign Direct Investment (FDI) with the expectation of driving growth through capital inflows, employment, and technology transfer. However, its actual impact remains uncertain due to weak governance, regulatory inconsistencies, and institutional inefficiencies. This raises the need to examine whether governance conditions shape the relationship between FDI and economic growth in Nigeria. This study therefore examines the impact of Foreign Direct Investment (FDI) and economic growth in Nigeria, emphasizing the moderating role of governance. While FDI is often viewed as a catalyst for growth through capital inflow, employment generation, and technological transfer, its real impact remains ambiguous in Nigeria. The study utilizes annual time series data from 1996 to 2023, sourced from the Central Bank of Nigeria, World Bank’s World Development Indicators (WDI), and Worldwide Governance Indicators (WGI). Employing the Autoregressive Distributed Lag (ARDL) model and interaction terms between FDI and governance variables, the study finds that FDI has an insignificant effect on economic growth. However, the interaction between FDI and governance show a positive and significant effect on economic growth. These findings demonstrate the critical role governance play in unlocking the growth enhancing potential of FDI. The study recommends structural governance reforms, regulatory consistency, and diversification strategies as essential pathways for making FDI a viable tool for Nigeria's economic transformation.
Source: NAU Eco Journals
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7220180455