Impact of foreign direct investment on economic growth of Nigeria: An examination using vector auto regressive (VAR) model
A Abdul Raheem, Ibrahim Nurudeen
The study assesses the impact of foreign direct investment on economic growth of Nigeria. Annual time series data from 1980-2014 was employed for the study. Three variables were used in the study namely, foreign direct investment as a percentage of Gross Domestic Product (GDP), real Gross Domestic Product (GDP) and exchange rate as a control variable. Augmented Dickey–Fuller test (ADF) or. DF-GLS unit-root test was used to identify the order of integration of the variables. The three variables are integrated of order one. i.e I (1). Hence, a Panthula principle of testing co-integration through Lindqvist, O., Johansson, K., Bringmark, L., Timm, B., Aastrup, M., Andersson, A. and Meili, M.  revealed a maximum of two co-integrating vectors. The impact between the two variables was assessed through impulse response function in a Vector error correction Model. However, the result reveals that foreign direct Investment has a positive relationship with Gross Domestic Product (GDP) throughout the 10 periods forecasted. The study concludes that Foreign Direct Investment (FDI) impact positively on Gross Domestic Product (GDP) of Nigeria and hence the need for the Nigerian government to set out more business-friendly policies that will attract more Foreign Direct Investment (FDI) in the country.