FOREIGN DIRECT INVESTMENT, TRADE OPENNESS AND ECONOMIC GROWTH: EVIDENCE FROM NIGERIA

Abstract

The globalization movement, which presents
enormous prospects for the majority of
developing nations to achieve quicker
economic growth through trade and
investment, has greatly expanded the
importance of foreign direct investments
(FDI) over the past few decades. FDI helps
foreign investors make better use of their
resources and assets, and it also helps host
nations gain access to superior technology
and join global production and commerce
networks. This paper examines the dynamic
and interrelationship among FDI, trade
openness and economic growth in Nigeria.
Annual time series for Nigeria from 1980 to
2020 was analyzed using the dynamic
Classical Multiple Linear Regression Model,
also a pre-estimation test of unit root was first
conducted using two approaches. The result
shows that a 1% increase in FDI would have
the reverse effect on economic growth,
reducing it by 19% annually, with all other
parameters being constant. It demonstrates
unfavorable trends for foreign direct
investment and trade openness,
demonstrating a weak correlation between
these variables and the Nigerian economic
growth index. Another component of the
model that has dynamic long-term impacts on
economic growth is the historical growth
trajectory. The results imply that the most
recent adjustments to Nigeria's economic
indicators have an effect on the present set of
economic growth. In order to encourage
exports and FDI inflow and to create a
business environment that will support
Nigeria's output growth dynamics, the essay
suggests expanding trade liberalization. In
order to allow indigenous enterprises to fully
engage in the global economy, it was also

suggested that Nigeria's government develop
policies to broaden the scope of foreign trade.