The Nexus Between Foreign Direct Investment, Trade Openness, and Economic Growth of Nigeria

Nnanna Harrison Ogudu (), David Qingzhong Pan () and Shuyu Wu ()
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Nnanna Harrison Ogudu: Beijing Normal University, Haidan District
David Qingzhong Pan: Beijing Normal University, Haidan District
Shuyu Wu: Beijing Normal University, Haidan District

Journal of the Knowledge Economy, 2024, vol. 15, issue 3, No 122, 13394-13424

Abstract: Abstract The study was undertaken to investigate the impact of foreign direct investment (FDI) and trade openness on the economic growth of Nigeria from 1980 to 2017 using the VECM and Granger causality tests. Data was collected from the World Development Indicators published by the World Bank and regressed using the unit root test of Augmented Dickey Fuller to determine the stationarity of the individual variables. Johansen cointegration technique was used to examine the cointegration relationship between the variables. The results show that there exists a positive long-run relationship between FDI and gross domestic product (GDP) and a negative long-run relationship between trade openness and GDP. Thus, to capture the short-run effects, the vector error correction model was estimated. Finally, Granger causality test was employed to investigate the causality between them. There was a unidirectional relationship between the variables. From the findings, to revamp the Nigerian economy, the government should implement quality conflict management institutions, ensure export oriented trade policies, and invest more in infrastructural developments.

Keywords: FDI; Trade openness; Economic growth; Real GDP; Developing economies; Nigeria; Government policies (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-023-01608-y

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