Foreign Direct Investments and Economic Growth in Nigeria_ a Disaggregated Sector Analysis

7/31/2019 Foreign Direct Investments and Economic Growth in Nigeria_ a Disaggregated Sector Analysis

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Journal of Economics and Sustainable DevelISSN 2222-1700 (Paper) ISSN 2222-2855 (Vol.3, No.10, 2012

Foreign Direct Inve

Dis

Department of

Tai SolarinTel: +234-

Abstract

This paper attempts to investigate th

The research developed a structur

private demand, government and

variables to capture the required pr

macroeconometric model of simult

sectors of the economy and the i

variations inherent therein. The fin

that the growth effects of FDI diff

trade openness, import substitution

investors so as to enhance the develKeywords: Foreign Direct Investm

1. Introduction

Economists are inclined to support

seek out the highest rate of return

theory propounded by Samuelson (

blessed with enormous mineral and

extreme personal poverty referred t

the country. In 2011, the country ra

Capita which is put at US$1,200 (T

Foreign Direct Investment (FDI) a

FDI is not only the transfer of ow

corporate governance and attendant

rates of investment returns in the e

& de-Wet, 2000).

Feldstein (2000) identified t

international flow of capital to redu

advantages of FDI. International

and human capacity development

Despite the contributions to corpora

capital intensive technology engen

countries. In addition, the creation

cases, my crowd out domestic opera

The importance of FDI in the

lots of researchers have been focusFDI on economic growth in Niger

especially at sub-national and sect

impact of FDI on the different sec

therein. Also, there is the need to

transmitted throughout the econo

multiplier effects, when in fact they

therefore be underestimated if thes

omitted variable bias (Onakoya, Tel

impact of the disaggregated FDI on

The choice of the study period

about 77 percent of the life of the co

for a comprehensive assessment ofstructured as follows: Section 2 fo

model specification. Section 4 cove

and offers some recommendations. I

pmentnline)

66

tments and Economic Growth

aggregated Sector Analysis

Adegbemi Babatunde Onakoya

conomics, College of Social and Management Scien

University of Education, Ijagun, Ijebu Ode, Nigeria03 5550124 E-mail [email protected]

e impact of Foreign Direct Investment (FDI) on econ

l macroeconometric model consisting of four bloc

xternal sectors. The model deploys 18 simultaneo

xies. The research adopted a three-stage least square

neous equations to capture the disaggregated impact

ter-linkages amongst the sectors in order to give

ing shows that FDI has a significant impact on out

r across sectors. The paper recommends sector-spe

development strategy incentives to existing investors,

pment of the country.nt, Economic Growth, Simultaneous Equation, Macr

the free flow of capital across national borders beca

since international ventures seek higher profit as pe

1948). Nigeria is believed to be a high-risk market

human resources. The co-existence of vast wealth i

o as the resource curse or 'Dutch disease' (Auty, 1

ked 170 out of 213 countries with respect to the Gro

e World Bank, 2011). Many analysts and experts ha

a veritable injection to kick-start the Nigerian econ

ership from domestic to foreign companies but also

transparency in business practice. Nigeria however,

erging markets, presently estimated to be 30 percent

e provision of diversification opportunities in oth

ce the risk faced by owners of capital in their home

nvestment also provides opportunities for the global

n addition to the promotion of competition in the

te tax revenues in the host country from profits gener

dered can exacerbate the unemployment situations

of monopolies in areas where the entry barriers ha

tors.

rowth dynamics of countries has created much intere

ed on the impact of FDI on the economy. Most of ta have examined various aspects. However, the nat

r levels have been largely ignored. Therefore, capt

tors of the economy would give better insight into

address the spill-over effects and externalities gene

y by examining the inter-sectoral linkages. Theor

exist, may lead to biased and inefficient results. Th

externalities are not factored into the estimation pro

la & Osoba).This study is an attempt to remove such

the real sectors of the economy.

covering 1970 to 2010 and spanning an assortment

untry, since attaining political independence in 1960

he effect of FDI on Nigeria's economy. The remaincuses on the relevant literature while section 3 is o

s data analysis and discussion of the results. Section

n the next section, the review of relevant literature is

www.iiste.org

n Nigeria: A

es,

mic growth in Nigeria.

s made up of supply,

s equations and 100

s (3SLS) technique and

of FDI on the different

better insight into the

ut of the economy but

ific policies, enhanced

and potential overseas

econometric Model

use it allows capital to

r the Capital Arbitrage

or investment although

natural resources and

93) appears to bedevil

ss National Income Per

ve suggested the use of

omy. This is because

a device for improved

has one of the highest

(Schoeman, Robinson,

er climes through the

countries, as one of the

transfer of technology

omestic input market.

ated by FDI, the highly

in labour surplus host

e been raised in some

t amongst scholars and

e works on the role ofure and impact of FDI

ring the disaggregated

the variations inherent

rated by FDI which is

tically, ignoring these

impact of FDI may be

cess which is a case of

biases and examine the

of economic cycles for

rovides an opportunity

ing part of this paper isthe methodology and

summarizes the paper

resented


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2. Literature Review

There have been several studies on

You +1'd this publicly. Undo

Trkcan, Duman, and Yet

using a panel dataset for 23 OECD

endogenous variables and estimate

of moments (GMM). They found ththat export growth rate is a statistic

is an endogenous relationship betw

between FDI and economic growth

causality. This test which is someti

on pre-testing evaluations. The as

directional causality but a long run

growth. Chakraborty and Nunn

post-reform India is widely believe

output data to Granger causality te

effects of FDI vary extensively acro

only transitory effects of FDI on ou

reinforcing in the manufacturing secin the manufacturing sector through

In a survey of African countri

unstable political and economic

global competition for FDI flows a

corroborates the findings of Jerome

of FDI in Nigeria. The authors as

framework concerning corporate la

investigation of the empirical relati

focus of Ayanwale (2007) who rep

development and stable macroecon

time series data is that the variabili

per capita, rate of inflation, world i

FDI in Nigeria, Anyanwu (2011) id

size, indigenization policy and chan

noted that the abrogation of the in

efforts must be made to raise the nat

The review by Endozien (199

linkage-effects were lower than t

substantial. The study of the invest

over thirty five years (1970-2005)

raising the GDP growth rates durin

Stout two-gap model (Chenery an

loans, direct investments and exp

development in Nigeria. Adelegan (

the impact of FDI on economic grand negatively related to gross d

statistically related to economic gr

identified the negative contributio

country. Bello and Adeniyi (201

economic growth and environment

annual time series data for the peri

long run relationship between FDI

environmental quality and FDI infl

causality between FDI and econom

Ogundipe and Aworinde, O. B. (20

relationship from economic growth

casual relationship during the postOseeghale and Amonkhienan (1987

economic growth in Nigeria. They r

the country in order to enhance its

pmentnline)

67

he relationship between FDI and economic growth w

iner (2008) test the endogenous relationship bet

countries for the period 1975-2004. They treat econo

a two-equation simultaneous equation system with t

at FDI and growth are important determinants of eaclly significant determinant of both variables. Their r

en FDI and economic growth. The examination of

by Karimi and Zulkornain (2009) was based on the T

es preferred to the standard Granger causality tests

sessment which is from 1970 to 2005 found no

relationship suggesting that FDI has indirect effect o

nkamp (2008) assess the proposition that the F

to promote economic growth. The study subject in

sts within a panel cointegration framework. The r

ss sectors. Although there is no causal relationship in

tput in the services sector, FDI stocks and output a

tor. In the services sector however, FDI appears to hacross-sector spillovers and externalities.

es Dupasquier, and Osakwe (2006) identified poor

policies, weak infrastructure, unwelcoming regula

impediments standing in the way of attracting sign

and Ogunkola (2004) which assessed the magnitude,

ribed the low level of FDI in Nigeria to deficienc

, bankruptcy and labour law, in addition to instituti

nship between non-extractive FDI and economic gr

orted that the determinants of FDI in Nigeria are ma

mic policy. The contributions of Ekpo (1995)'s st

y of FDI into Nigeria can be explained by the politi

terest rate, credit rating and debt service. In his stud

entified change in domestic investment, change in do

ge in openness of the economy as major determinant

digenization policy in 1995 encouraged FDI inflow

ion's economic growth so as to be able to attract more

) of the linkage effects of FDI on the Nigeria econo

e Chenery-Watanable average (Chenery-Watanabl

ent trend by Ariyo (1998) and of its impact on Nig

reveal that only private domestic investment consi

the period. Indeed, FDI played an insignificant role.

Stout, 1966), Oyinlola (1995) modeled foreign ca

ort earnings and concludes that FDI has a negati

2000) apply the seemingly un related regression (S

wth in Nigeria and found out the FDI is pro-consuomestic investment. Akinlo (2003) submits that f

owth in Nigeria. This is corroborates the study of

ns of public investment as accounting for distortion

) conducted an investigation into on the causal re

sing the Autoregressive Distributed Lag (ARDL) ap

d spanning 1970-2006. The findings show that ther

nd growth on the one hand while there exists a long

ws on the other hand. The exploration of the possib

ic growth in Nigeria in the pre and post deregulatio

11) using Granger causality analysis. The result sh

(GDP) to FDI in the pre deregulation era (1970-19

-deregulation era (1986-2007).) and Brown and Obinna (2006) report that FDI is po

ecommend that the government should encourage gr

economic performance. Oyatoye, Arogundade, Ade

www.iiste.org

ith conflicting findings.

een the two variables

mic growth and FDI as

e generalized methods

other and in addition,sults indicate that there

the causal relationship

oda-Yamamoto test for

oes not rely so heavily

trong evidence of bi-

n Malaysia's economic

DI boom recorded in

ustry-specific FDI and

esult show that growth

the primary sector and

e found to be mutually

ve caused rapid growth

corporate governance,

ory environments and

ificant FDI flows. This

direction and prospect

in the country's legal

onal uncertainty. The

wth in Nigeria was the

rket size, infrastructure

udy which made use of

al regime, real income

of the determinants of

estic output or market

of the FDI. He further

into Nigerian and that

FDI.

y show that the broad

e, 1958) and was not

eria's economic growth

stently contributed to

Using the Chenery and

ital to include foreign

e effect on economic

RE) model to examine

mption and pro-importreign capital was not

Ogiogio (1995) which

to GDP growth in the

lationship among FDI,

proach by applying the

was no existence of a

un causal link between

ility of the existence of

era was conducted by

ows one-way causality

85) and the absence of

sitively associated with

ater inflow of FDI into

isi, and Oluwakayode


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(2011) reviewed the effect and rela

2006) using Ordinary Least Squar

variables. The result further show

in GDP. On the micro economic le

productivity positive spill-over of fo

From the literature surveyed, the fi

Carkovic & Levine (2005) and Chand economic growth which is typ

studies. Having reviewed the lite

disaggregated impact of FDI on the

3. Methodology and Model Specif

3.1 Methodology

The study deploys simultaneous eq

& Waverman (2001) and Belaid (2

appears as explanatory variable in

variables. The paper also employs

care of any probable occurrence of

there is no need to test for stationarterms (Zellner and Theil, 1962). In

sample data actually contain suffic

estimating the model of this study,

pre condition for the use of 3SLS.

obtained were conducted. These a

examine whether the disturbances a

test examines whether the present v

if the disturbances are either not n

the estimation process will be spu

estimation of the model was carried

3.2 The Empirical Model

There is the need to address the s

throughout the economy is addres

simultaneous equations that seeks

based on the received theories of ec

Sannikov, 2011 and Krishnamurty

up of four major blocks: supply (o

government expenditure and the ex

with the supply block. The descripti

Supply Block

The supply block given by equatio

the economy. In this case, the inter

infrastructure, manufacturing, oil

Demand Block

In the demand (expenditure) block cthe description of flows of interactio

Private Demand Block

CF= a33+ a34PF+a35YDc+a36IR +

CNF= a37 +a38PNF +a39YDc + a40

INVIF=a41+ a42YIF+a43FDIIF+a44G

INVMFG = a46+ a47YMFG +a48INVI

(3.25)INVAGRIC= a53+ a54YAGRIC+a55INVI(3.26)

YIF= a1+ a2GCRIF+ a3FDIIF+ a4YMFG = a6+ a7GCRMFG + a8YIF+ a9Y

YAGRIC= a13+ a14GCRAGRIC+a15YIF+a

YOIL = a21 + a22GCROIL + a23YIF+a

YSERV= a28 +a29YIF+a30FDISERV+a31

pmentnline)

68

ionship between FDI and economic growth in Niger

regression analysis and report a positive relatio

d that one Naira increase in the value of FDI will lea

vel, the review of Ayanwale and Bamire (2001) at t

reign firms on domestic firm's productivity.

dings on the FDIgrowth nexus is far from being co

kraborty and Nunnenkamp (2008) that the causal reified by a considerable degree of heterogeneity ca

ature, the next focus is on the methodological is

different sectors of the economy.

cations

ation regression model as recommended by many sc

04). This is particularly critical when a dependent v

another equation which may lead to a feedback re

he three stage least squares (3SLS) an estimator wh

non-stationarity and consequential possibility of spu

ity. It also addresses the correction of contemporanesing the 3SLS estimator technique however, it is nec

ient information to provide estimates of the paramet

the equations are confirmed as being over all over

A number of post estimation tests to ascertain the

e the normality and serial correlation tests. The n

re normally distributed or not (Jarque, & Bera, 1980

alue of the residuals depends on its past value. It is

rmally distributed or serially correlated or both, th

ious and policy implications drawn from such resul

out with the use of E-ViewsTM

(version 6.1).

pill-over effects and externalities generated by FDI

sed through the use of a macroeconometric mode

o explain the behaviour of key economic variables

nomics (see Akanbi & Du Toit, 2010; Annicchiarico,

Pandit, 1985). The model consists of 18 behavioura

utput), private demand (household consumption an

ternal sectors. The model is stated below in equatio

on of the variables are available as Appendix1.

s (3.17) to (3.31) describes the output basic macroec

-sector linkages among five identified economic sec

nd services sectors are described.

onsists of private and government demand. Equationsns among variables for the private demand.

6 (3.22)

+e7 (

R IF+a45PTIF + e8 (3.

F + a49IR+a50 FDIMFG +a51 GCRMFG + a52PMFG +e9

+a56IR+ a57YD + a58GCRAGRIC + a59PAGRIC + e10

IF+ a5PIF+e1 (3.17)

OIF+a10FDIMFG +a11KMFG+a12PMFG + e2

16YOIF+ a17FDIAGRIC+ a18KAGRIC+ a19RAIN +a20PAGRIC +e3

24FDIOIL+ a25KOIL + a 27POIL + a27OPEC+ e4

SERV+ a32PSERV + e5

www.iiste.org

ia for 20 years (1987

nship between the two

d to N104.749 increase

e firm level show that

clusive. It is opined by

ationship between FDIlls for country-specific

sues that captures the

holars including Roller

ariable in one equation

lationship between the

ich by its design, takes

ious regressions. Thus,

ous correlation of errorssary to establish if the

ers (identification ). In

-identified which is the

eliability of the results

rmality test is used to

. The serial correlation

worth emphasizing that

e results obtained from

ts will be invalid. The

which are transmitted

l. This is a system of

at the aggregate level,

2011; Brunnermeier &

l equations and is made

investment by firms),

s 3.17 to 3.34 starting

onomic components of

ors namely agriculture

(3.22) to (3.28) give

.23)

4)

(3.18)

(3.19)

(3.20)

(3.21)


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Government Block: The governme

External Block: The external secto

equations (3.32) to (3.34).

The conceptual framework of the

economic sector and blocks of the e

Fig. 1: Conceptual Flow of the Real

Investment and Economic Gro

Source: Adapted from Onakoy

where:

YTIF = Output of telecommun

YOIF = Output of other infra

YMFG = Output of manufacturin

YAGRIC = Output of Agricult

YSERV = Output of Service

YOIL = Output of Oil

There are three demand blocks m

expenditure and the external sector.

non-food elements. The componentfiscal deficit. The external block co

foreign and local investments. The

represented in the system of simulta

GE = a71 +a73GRV +a74(CG)+ a75EGRV = a79+ a80YIF+ a81YOIF+ a82

FDF =a84+a85FD+a86NFA +a87E

X =a88 + a89Y +a90TOT + a91EX

(3.32)

M = a92 = a93TAR +a 4Y+ a 5T

pmentnline)

69

nt demand is given by equations (3.29) to (3.31).

block, showing equilibrium between exports and im

acroeconometric model depicting the inter-linkages

onomy is presented in Figure 1

Sector Channel Transmission between Telecommuni

th.

a, Tella and Osoba (2012)

ications infrastructure

structure

re

de up of the private demand (consumption and in

In the private demand block, the consumption is ma

s of the government block are government revenue,nsists of the export, import and the reserves. Invest

schematic diagram simplifies the complex algebrai

eous equations 3.17 through 3.34.

DS+a76DDS+a77Y+a78 FD+e13

DI +a83NX +e14

R +e15

+e16

T+a 6EXR+ +e17

www.iiste.org

orts, is given by

between the different

ations Infrastructural

vestment), government

de up of both food and

its expenditure and theent is composed of the

c relationships hitherto

(3.29)

(3.30)

(3.31)


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The supply block which is the

infrastructure (YIF), manufacturing (

block, the FDIIF, FDIMFG,FDIAGRIC,

infrastructure, manufacturing, agri

hitherto identified as dependent vari

of the supply block (YMFG, YAGRIC,

Organisation of Petroleum Exporti(YAGRIC) and the output of oil (YOIL)

4. Data Analysis and Discussion

The results are presented in four p

on relevant sectors in the private d

The result of the relationship betw

the four explanatory variables (eqn

Capital Exponential Ratio in tel

telecommunications infrastructure

telecommunications infrastructure

telecommunications infrastructure (

and (3.21) account for 97 percentvariation in the output of manufactu

Although the adjusted coefficients o

results are higher in each of the case

The results show that there ex

infrastructural sector. This can be

transportation, rail, pipelines, water

public non excludable goods havemarket mediated investment during

the services sector. The provision

health , private non-profit organis

Indeed the privatization law of 1988

The relationship between the

and statistically significant with a

(2.37), a percentage increase in wo

output. Although the privatization

industries, it allowed such compani

negatively related to the output of a

A percentage increase in the FDI in

percent. The result shows that fointroduction of foreign goods and

consumption of the local rice has be

Dependent

Variables

YIF

YMFG

YAGRIC

Y

YSE

pmentnline)

70

aggregate output of the real sector of the economy, c

YMFG), agriculture (YAGRIC), oil (YOIL) and services (YSFDIOIL and FDISERV are the relevant explanatory va

culture, oil and services respectively. The output

ables however also serve an explanatory role to the o

YOIL and YSERV). The annual rainfall (Rain) and th

g Countries (OPEC) are additional regressors of thespectively.

rts. First, the impact of FDI on the composite secto

emand block, in the government block and thereafte

en the output infrastructural investment (YIF) as the

. 3.17) in Table 1 shows that the four explanatory

communications infrastructure -GCR IF, Foreign

(FDI IF), Capital Stock of infrastructure (K(PIF) account for 97 percent (

2R = 0.9 YTIF). In the same vein the regressors in the equatio

nd 98 percent , 99 percent and 99 percent respecting, agriculture, oil and services sectors.able 1: Results of Relevant Supply Block

ote: a, imply 1 percent significance level. t-statistic

f determination (2R ) are rather high, the Durbin-Wat

s. Therefore, the results can be accepted as valid.

st positive but insignificant relationships between F

explained by the fact that the provision of infrast

air, electricity telecommunications, post, broadcasti

been in the purview of the government. There is nothe scope of this study. FDI is also not significantly

f insurance, real estate, business services, public ad

ation social and community services have been do

in the main, put paid to the involvement of foreign c

utput of manufacturing sector (YMFG) and the FDI i

-value of (2.37) at 1 percent level. In effect, with

ld result in about 0.24 percent reduction in the gro

law of 1988 curtailed the involvement of foreign

es to operate in heavy duty industries. FDI in the ag

riculture (YAGRIC) although it is statistically signi

the agricultural sector of the economy would cause a

reign intrusion into this sector has had deleteriotastes has led to the abandonment of local farm

en neglected.

FDIas Explanatory Variable R

2

ur

Wat

Stat

0.10255

(2.1005) 0.97

-0.2373

-(2.3658)a

0.97

-0.1659

-(3.5168)a

0.98

IL 1.8927

(4.1651)a

99

RV 0.1123

(2.0702) 99

www.iiste.org

onsists of the output of

ERV). Within the supply

riables to the output of

of infrastructure (YIF)

her output components

e annual output of the

e output of agriculture

rs of the supply block,

r in the external block.

dependent variable and

variables (Government

Direct Investment in

F), Average Price of

7) of the output of

s (3.18), (3.19), (3.20)

ively in explaining the

in parenthesis

son Statistics (DW) test

I and the output of the

ructure including road

g and water which are

case of private sector,related to the output of

inistration, education,

minated by Nigerians.

mpanies in this sector.

the sector is negative

a coefficient value of

th of in manufacturing

companies in primary

ricultural sector is also

ficant at 1 percent level.

reduction of about 0.17

s impact because theing. For example, the

bin-

son

stics

1.925

1.09

1.65

1.76

1.34


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With respect to the outputs o

coefficient value of (1.9) which indi

yield an increase of about 2 percen

including crude, petroleum, natural

various independent variables in th

account for between 97 percent

manufacturing, oil and services. ThiTable 2

Note: a imp

The results show that there exist po

service sectors at 1 percent level.

expenditure on infrastructure would

is due to the facilitating role of gov

0.1 percent in the investment in inf

sector is negative but significant at

the economy lack basic infrastructu

with the advantage of technology

conformity with the work of AkanbiTable 3:

Note: b, im

The independent variables in the

variations in government revenue.

model has no serial autocorrelation

statistically significant to governme

would increase government revenu

revenue to the government accrues

by FDI. The independent variable

variations in external reserves.

coefficient ofdetermination signifie

Dependent

Variables

INVIF

INVMFG

INVOIL

INVSERV

Dependent

Variables

GR

pmentnline)

71

oil (YOIL), FDI is positive and significantly related

cates that a percentage increase in foreign investment

in the output of oil sector. The upstream segment o

gas and oil refining is dominated by foreign multin

e equations (3.24), (3.25), ( 3.27) and (3.28) of the

and 99 percent of the variations in investment

s high value of adjusted R2 signifies high goodness of: Result of Relevant Variables in Demand Block

ly 1 percent significance level respectively. t-statisti

itive and significant relationships between FDI and i

n increase in FDI complemented with increase in t

in the long run, lead to 8 percent increased investme

rnment in the sector. Also, a percentage increase in

astructure. However, the impact of FDI on investme

1 percent. This result reveals the true picture of the

e that can enhance the growth of the economic. In ad

nd finance seem to be crowding out domestic prod

and Du Toit (2010).Result of Relevant Variable in Government Block

ly 5 percent significance level. t-statistic in parenthes

equations (3.30) of the government block account

The higher level Durbin-Watson Statistics (DW)

roblem, thus implying that the model is significant.t revenue at 5 percent level which implies that, a per

relative to the overall output of the economy by 0.0

rom contributions to corporate and other tax revenue

s in the equations (3.30) of the external block accou

he Durbin-Watson Statistics (DW) value being hi

s no positive serial autocorrelation problem which can

FDIas Explanatory

Variable R2

Durbin-

Watson

Statistics

0.1188(7.2089) 0.97 1.34

-0.0002-(8.4438)a 0.99 1.33

8.0808(4.7579)

a0.99 1.70

0.8332

(3.281)a

0.97 1. 36

FDIas Explanatory

Variable R2

Durbin-

Watson

Statistics

0.0642

(2.0307)b 0.98 2.41

www.iiste.org

at 1 percent. It has a

in the oil sector would

f the oil and gas sector

ational companies. The

private demand block

in the infrastructure,

fit.

c in parenthesis

vestment in the oil and

e ratio of government

t in the oil sector. This

DI would lead to a rise

t in the manufacturing

igerian economy since

ition, the foreign firms

ucers. This result is in

is

for 98 percent of the

alue indicates that the

he coefficient ofFDI is

centage increase in FDI

6 percent. The increase

from profits generated

t for 97 percent of the

gher than the adjusted

still be controlled.


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Table

The FDI is statistically significant t

would increase external reserves by

inflow and improved average balan

4.1 Post Estimation TestsThe results of the post-estimation tedisturbances are normally distributeJarque-Bera test obtained shows tha

Ta

The serial correlation test shows tha

research found no serial correlation

probability values for lag 1, 2, 3 and

greater than the conventional level o

reject the Null hypothesis, implying

Table 6

In the next section, the conclusion a

5. Conclusion and Recommendati

The conclusion of this study is th

Nigeria. However, the relationshi

to the oil sector, it is negatively r

explains investment in the oil and

government revenue and external bl

makers armed with exact knowledg

sectors of the local economy, can

growth-promoting foreign investme

Therefore policies based solely o

formulation and deployment.The second plank of finding

economic blocks and sectors are li

economy which is hitherto largely o

Depende

Variabl

Compo

Joi

lags Q-St

1 426.4

2 804.9

3 1193.

4 1542.

SourcNote: dfis

Null Hy ot

SouNote: df

Note:

pmentnline)

72

:Result of Relevant Variable in External Block

external reserves at 5 percent level. In essence, a per

0.13 percent. The increased external reserves may be

e of payment position during the period.

sts conducted to ascertain the reliability of the estimatd (see Table 3). The probability value (0.99) of the joi

the Null hypothesis cannot be rejected.ble 5:SystemNormality Tests (Joint Result)

the present value of the residuals do not depend on t

roblem up to lag 4 for the system variable models. S

4 in Table 4 are (0.1), (0.18), (0.13) and (0.22) respe

f significance of 5 percent (0.05). As a consequence,

that there is no serial correlation.

: System Portmanteau Tests for Autocorrelations

d recommendations are presented.

ns

at foreign direct investment contributes positively t

s with the different sectors are different. Whereas, F

elated to agriculture and manufacturing. Also, alth

service sectors at 1 percent level, it is only signi

ock, and insignificant to the output of services sector.

e of the type of FDI projects and the disparate conse

ore accurately fashion out selective FDI policies wit

ts. FDI determinant factors vary from sector to sect

aggregate foreign investments impact may lead t

is the confirmation of inter connectivity across th

ked as consequence of externalities and spill-over e

mitted in the literature. This supports the Romers en

nt

es

FDIas Explanatory

Variable R2

Durb

Wats

Statis

RES 0.1253

(1.0902)b 0.97 1.

nent Jarque-Bera df Prob

t 659.2963 10395 0.99

at Prob. Adj

Q-Stat

Prob.

443 0.1740 437.3787 0.0958

607 0.4442 835.8170 0.1843

362 0.5486 1255.711 0.1285 1

235 0.8466 1643.347 0.2203 1

: E-ViewsTM (version 6.1) and Author's computation.degrees of freedom for (approximate) chi-square distribution.

hesis: No residual autocorrelations u to la h.

rce: E-ViewsTM (version 6.1) and Author's computations.is degrees of freedom for (approximate) chi-square distribution.

Null Hypothesis: Residuals are multivariate normal.

b, imply 5 percent significance level. t-statistic inparenthesis

www.iiste.org

centage increase in FDI

due to net capital

es show that thent estimation of

eir past values. The

ecifically, the

tively which are far

he study does not

o economic growth in

DI is positively related

ugh FDI significantly

ficant at 5 percent for

This means that policy

uences on the different

h the view to attracting

r and across industries.

o distortions in policy

e sectors. The various

fects of the FDI on the

ogenous growth theory

in-

n

tics

.37

.

7

df

00

00

200

600


8/10


and the Vintage capital theory. T

developing and developed nations.

The negative relationship between b

in the manufacturing sector can be

foreign and domestic companies es

the import substitution development

Although no country is in autforeign direct investment due to de

FDI among developing countries a

attracting major investment flows t

enhancement of dealings with exi

investment opportunities to prospec

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Notation Definition

CNF Non food

CF Food Con

EXR Exchange

FDF Fiscal defi

INVAGRIC Investmen

INVIF Investmen

INVMFG Investmen

INVOIL Investmen

INVSERV Investmen

M Import

NX Net ExporRES Reserves

X Export

Y Overall O

pmentnline)

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irect Foreign Investment and Nigerias Economic De

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etrieved from econ.worldbank.org Data Publica

e-stage Least Squares: Simultaneous Estimation of E

Appendix1:

Description of VariablesType

Consumption Endogeno

umption Endogeno

rate Endogeno

cit financed by the CBN Endogeno

in Agriculture Endogeno

in infrastructure Endogeno

in manufacturing Endogeno

in Oil Endogeno

in Service Endogeno

Endogeno

EndogenoEndogeno

Endogeno

tput Endogeno

www.iiste.org

elopment. The

BER Working Paper

rial independence of

ion and prospects;airobi.

Personal RePEc

omy. Delhi: Hindustan

in Nigeria. In A.

e for PublicPrivate

ic Growth and Foreign

ean Journal of

nfrastructure andt and Economic,

vestment (1960-1984).

n Direct Investment,

nces, 2(1) 67.

). The Nigerian

Journal, 58, 165

development: A

s and Fiscal Discipline

-44.

th affect each other?

World, Izmir, 2008

tions

quations.

Unit

s N/million

s N/million

s Index

s N/million

s N/million

s N/million

s N/million

s N/million

s N/million

s N/million

s N/millions N/million

s N/million

s N/million


10/10


YAGRIC Output of

YMFG Output of

YIF Output of

YOIL Output of

YSERV Output of

CG Credit to t

EDS External DDDS Domestic

Notation Definition

FD Fiscal Def

FDIAGRIC Foreign Di

FDIMFG Foreign Di

FDI OIL Foreign Di

FDISERV Foreign Di

FDIIF Foreign Di

GE Total Gov

GCRAGRIC Governme

agriculture

GCRMFG Governmemanufactu

GCROIL Governme

GCRSERV Governme

agriculture

GRV Governme

IR Interest rat

KAGRIC Capital St

KMFG Capital St

KIF Capital St

KOIL Capital St

KSERV Capital sto

NFA Net Foreig

OPEC OPEC out

PAGRIC Price of ag

PMFG Price of m

PNF Price of no

POIF Price of ot

POIL Price of oi

PSERV Average p

PIF Average p

PF Food price

RAIN Annual Ra

TAR Implicit T

TOT Terms of

YDc Income peW Wealth

PROFILE Onakoya, Adegbemi Ba

Division) from the then Universi

Administration (Marketing Manage

Lagos State University in the disti

Olabisi Onabanjo University, Ago I

Nigeria and the Chartered Institut

Chartered Marketing Institute of Ni

to Ogun State Government, Nigeria.

economy including banking, manuf

and education.He currently lectuspecialization in public sector econo

pmentnline)

75

Agriculture Endogeno

anufacturing Endogeno

nfrastructure Endogeno

il Endogeno

Service Endogeno

e government Exogenou

ebt Service Exogenouebt Service Exogenou

Type

cit Exogenou

rect Investment in agriculture Exogenou

rect Investment in manufacturing Exogenou

rect Investment in oil Exogenou

rect Investment in service Exogenou

rect Investment in infrastructure Exogenou

rnment Expenditure Exogenou

t Capital Expenditure ratio in Exogenou

t capital expenditure ratio ining

Exogenou

t capital expenditure ratio in oil Exogenou

t capital expenditure ratio in Exogenou

t Revenue Exogenou

e Exogenou

ck in Agriculture Exogenou

ck in manufacturing Exogenou

ck in infrastructure Exogenou

ck in oil Exogenou

ck in service Exogenou

n Assets Exogenou

ut Exogenou

riculture Exogenou

nufacturing Exogenou

n- food items Exogenou

er infrastructure Exogenou

Exogenou

ice of services Exogenou

ice of infrastructure Exogenou

Exogenou

infall Exogenou

riff Exogenou

rade Exogenou

capita ExogenouExogenou

atundeobtained his first degree in Economics in 19

y of Ife (now Obafemi Awolowo). He also hol

ent) degree from Olabisi Onabanjo University and

ction class. He is currently a doctoral student in ap

woye, Nigeria. He is a Fellow of the Institute of Ch

e of Taxation of Nigeria. His other professional

geria and the Quality Society of Nigeria. He is the i

Mr. Onakoya has acquired varied experience from

cturing, Oil & Gas services, multi-national corporati

es at Tai Solarin University of Education, Ijemics.

www.iiste.org

s N/million

s N/million

s N/million

s N/million

s N/million

N/million

N/millionN/million

Unit

N/million

N/million

N/million

N/million

N/million

N/million

N/million

Ratio

Ratio

Ratio

Ratio

N/million

Rate

N/million

N/million

N/million

N/million

N/million

N/million

M/Barrels

N/million

N/million

N/million

N/million

N/million

N/million

N/million

N/million

Millimetre

Rate

Index

N/millionN/million

9 (Second Class Upper

s Master of Business

he M.Sc. degree of the

plied economics at the

artered Accountants of

ffiliations include the

mediate past Secretary

the major sectors of the

n, telecommunications

u Ode, Nigeria with

Documents

Foreign Direct Investments and Economic Growth in Nigeria_ a Disaggregated Sector Analysis