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A Cost-Benefit Analysis of Foreign Direct Investment Inflows into Nigeria

Osamo Caleb Kehinde, Awogbemi Clement Adeyeye, Anthony Ayo Andrew

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Abstract

This paper is focused on the benefits and costs of foreign direct investment (FDI) in Nigeria. The effects of FDI on economic growth and development for the period 1970-2009 were analyzed using the annual series data of manufacturing firms sourced from Central Bank of Nigeria and National Bureau of Statistics (NBS). We employed ordinary least squares (OLS) regressions in estimating the parameters of the models used, and the empirical analysis was conducted unit root analysis by using Augmented Dickey-Fuller test. The time series properties of the variables considered were also investigated using pair wise Granger causality test. It was found out that FDI has a positive and significant relationship with the real gross domestic product. We therefore concluded that FDI creates no significant problems for Nigerian economy.

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What this paper is about

This paper is focused on the benefits and costs of foreign direct investment (FDI) in Nigeria. The effects of FDI on economic growth and development for the period 1970-2009 were analyzed using the annual series data of manufacturing firms sourced from Central Bank of Nigeria and National Bureau of Statistics (NBS). We employed ordinary least squares (OLS) regressions in estimating the parameters of the models used, and the empirical analysis was conducted unit root analysis by using Augmented Dickey-Fuller test. The time series properties of the variables considered were also investigated using pair wise Granger causality test. It was found out that FDI has a positive and significant relationship with the real gross domestic product. We therefore concluded that FDI creates no significant problems for Nigerian economy.

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Available abstract

This paper is focused on the benefits and costs of foreign direct investment (FDI) in Nigeria. The effects of FDI on economic growth and development for the period 1970-2009 were analyzed using the annual series data of manufacturing firms sourced from Central Bank of Nigeria and National Bureau of Statistics (NBS). We employed ordinary least squares (OLS) regressions in estimating the parameters of the models used, and the empirical analysis was conducted unit root analysis by using Augmented Dickey-Fuller test. The time series properties of the variables considered were also investigated using pair wise Granger causality test. It was found out that FDI has a positive and significant relationship with the real gross domestic product. We therefore concluded that FDI creates no significant problems for Nigerian economy.

Key concepts: Foreign direct investment, Ordinary least squares, Granger causality, Gross domestic product, Unit root test, Econometrics, Augmented Dickey–Fuller test, Unit root

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