Foreign Direct Investment and Economic Growth in Nigeria

Chapter One

1.1 Background of the Study
Foreign Direct Investment (FDI) plays a crucial role in stimulating economic growth. It brings capital, technology, and management expertise that enhance productivity. Moreover, FDI can create jobs, expand exports, and foster competition among domestic firms (World Bank, 2023).

In Nigeria, the government has made several efforts to attract foreign investors. Policies such as the establishment of the Nigerian Investment Promotion Commission and free trade zones were designed to improve the investment climate. However, despite these efforts, FDI inflows remain unstable. Consequently, the country has not fully realized the expected benefits of foreign investments.

Furthermore, economic and political uncertainties often discourage long-term investments. Issues such as insecurity, inadequate infrastructure, and corruption weaken investor confidence (Adewale, 2022). As a result, FDI’s contribution to economic growth has been inconsistent across different sectors.

1.2 Statement of the Problem
Although FDI is expected to boost growth, Nigeria still struggles with slow economic performance. Inconsistent policies and poor infrastructure have reduced the flow of investment. Moreover, high inflation and exchange rate volatility make the business environment less attractive. Therefore, it is necessary to examine the real impact of FDI on economic growth in Nigeria.

1.3 Objectives of the Study
The main objective is to analyze the effect of foreign direct investment on economic growth in Nigeria.
The specific objectives are to:

1. Examine the trend of FDI inflows into Nigeria.

2. Evaluate the relationship between FDI and GDP growth.

3. Identify factors that influence the flow of FDI in Nigeria.

1.4 Research Questions

1. What is the trend of FDI inflows in Nigeria?

2. How does FDI affect economic growth?

3. What factors influence foreign investment decisions?

1.5 Significance of the Study
This study is significant because it explains how foreign investments contribute to national development. Furthermore, it provides insights that will guide policymakers in creating a more attractive investment environment. In addition, it will benefit researchers and students interested in the link between globalization and economic growth.

1.6 Scope of the Study
The research focuses on Nigeria between 2000 and 2024. It uses key indicators such as FDI inflows, GDP growth, and investment policies.

1.7 Definition of Terms

• Foreign Direct Investment: The acquisition of assets in a foreign country with the aim of controlling or managing operations.

• Economic Growth: The increase in the value of goods and services produced in an economy over time.