EMPIRICAL ANALYSIS OF THE IMPACT OF SECTORAL AND TOTAL FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH EVIDENCE FROM NIGERIA (1981-2018)

Foreign Direct Investment (FDI) is a vehicular mechanism for an economy to attain growth and development. It helps deliver important benefits such as the creation of employment, transfer of technology, economic boost, and spill-overs (horizontal or vertical) to other sectors of the economy. However, the Nigerian economy has a different experience. While there are numerous empirical studies on the impact of FDI and economic growth in Nigeria, there is a dearth of studies that measure the impacts of both sectoral and total FDI on the country's economic growth and unveil how the impact of the sectoral FDI compares with the total FDI. In view of this, this study was conducted to investigate the impacts of sectoral and total FDI on the economic growth of Nigeria, with specific reference to how the sectoral FDI compares with the total FDI from 1980 to 2018. The study used the Autoregressive Distributive Lag (ARDL) model as a technique to estimate all relevant variables and modelled it on the primary, secondary and services sectors of the economy to show the sectoral FDI’s impacts; and the overall FDI. These were carried out using the short and the long-run dynamics. Findings showed that in the short-run, FDI has an insignificant effect in the sectors and total on economic growth. Whereas in the long run, the FDI has a negative and significant impact in the primary sector, a positive and significant impact in the secondary sector, but had an insignificant impact in the service sector on economic growth. The impact in the total was found significant only in the long run. The negative effect of FDI on the primary sector, in the long run, was adduced to the resource curse factor and possibly due to the limited linkages of the primary sector. While the secondary sector has positive and significant results, in the long run, are due to its ample forward and backward linkages to the economic activities, although the secondary sector is around 20% only of the FDI. Meanwhile, the FMOLS and DOLS showed significant results for the sectors and total in the short run. In both the FMOLS and DOLS, the primary sector is negative, the secondary sector is positive, the service is positive in the FMOLS, and the DOLS negative. The total FDI is positive and significant in both the FMOLS and the DOLS. Based on the study's findings, it is important that the government and other policymakers put in appropriate measures to ensure that foreign investment inflow effectively benefits the economy in the country. The adoption of the free float determination of exchange rate which the market would determine; and increasing focus on a more open economy and adopt policies like export promotion strategy which would aid the growth of infant industries