An Assessment of the Impact of Foreign Direct Investment on Industrial Performance in Nigeria

Iseolorunkanmi, Ojo Joseph and Rotimi, E.M. and Babatunde, Olamide Olaoluwa and Ake, Modupe Bosede and Umar, Aishat Princess and Ahmed, Ayodele Victor and Akinojo, Ibukun C. (2023) An Assessment of the Impact of Foreign Direct Investment on Industrial Performance in Nigeria. Journal of Management and Corporate Governance, 15 (1). pp. 63-84. ISSN 2277-0046

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Abstract

Foreign Direct Investment has an impact on various aspects of the economy. This study beamed its searchlight on the impact of foreign direct investment on industrial performance. It specifically focused on the manufacturing subsector of the Nigerian economy from 1981 to 2021. The data used in the study were sourced from the World Bank Development Indicator which includes; manufacturing output, foreign direct investment, interest rate, exchange rate and inflation rate. The variables were subjected to unit root tests in other to ascertain their level of integration. However, the result indicates a mixed order of integration which informs the decision to adopt the ARDL method as the best technique of estimation. The results of this study showed that foreign direct investment exerts a negative and significant impact on manufacturing output in Nigeria in the long run. Conversely, the impact of foreign direct investment on manufacturing output is weak and positive on manufacturing output in the short run. This indicates that FDI can only contribute to the manufacturing subsector in the short run. The long-run results state a Negative significant impact of the inflation rate on the manufacturing sector of Nigeria. In the long run, disequilibrium in manufacturing output is adjusted at the speed of 34.4%. The pairwise Granger causality analysis reveals that there is no causal relationship between FDI and the Manufacturing sector. The study therefore recommends that Nigeria should focus on foreign direct investment that has an immediate impact on the manufacturing subsector, and also, any FDI with close substitute should be discouraged using fiscal policy that is, to discourage the inflow of FDI to the manufacturing subsector except for those with essential FDI with the nature to induce manufacturing subsector in the short run

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