Foreign Direct Investment, Domestic Capital Formation and Economic Growth of Nigeria

Oluwabunmi Dada (), Joel Sylvester Ahmodu () and Kehinde Omolade Daramola ()
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Oluwabunmi Dada: Ekiti State University
Joel Sylvester Ahmodu: Ekiti State University
Kehinde Omolade Daramola: Federal University Oye Ekiti

Acta Universitatis Danubius. OEconomica, 2023, issue 19(5), 139-151

Abstract: The low level of domestic capital formation experienced in most developing economies coupled with the desire for sustainable economic growth has necessitated the need to seek assistance in the form of foreign direct investment (FDI) to bridge the savings-investment gap. This study, therefore, examined the impact of FDI and domestic capital formation on the economic growth of Nigeria. Data were sourced from CBN statistical bulletin from 1986-2021 using Autoregressive distributed lag coupled with Granger causality tests. The result showed that domestic capital formation has an insignificant positive impact on economic growth while FDI revealed an insignificant negative relationship. Exchange rate, interest rate, and inflation rate showed an insignificant negative relationship with the economic growth of Nigeria. It was therefore recommended that governments at various levels should create an enabling environment conducive to domestic capital formation and investment process bearing in mind the stability of macroeconomic variables in the country. More so, Nigerian government should look inward, rely less on foreign direct investment and develop the country’s infrastructure facility to aid investment.

Keywords: Economic Growth; Foreign Direct Investment; Domestic Capital Formation; Exchange Rate (search for similar items in EconPapers)
Date: 2023
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