Trade Openness, Foreign Investment and Economic Growth in Nigeria (1981-2021)

Abstract

This study investigated the impact trade openness, foreign investment and economic growth in Nigeria spanning from 1981 to 2021. Data for the study were obtained from Central Bank of Nigeria Statistical bulletin and World Bank data. 2021. The formulated model was subjected to unit root test using the Augmented Dicey Fuller unit root approach. The ADF result revealed that the variables were not stationary at levels but became stationary after first difference. Based on this scenario the study adopted the Johansen co-integration technique to ascertain if there is long-run relationship between the variables. The result of the Johansen test revealed existence of long-run relationship. The Error correction modem (ECM) was used to ascertain the behaviour of the variables and the speed of adjustment. Thus, the result revealed that exchange rate (EXR) is negative but significant to influence real gross domes????c product (RGDP), while trade openness (TOP) is positive and significant to influence real gross domestic product (RGDP). However, foreign direct investment (FDI) and foreign portfolio investment (FPI) have insignificant relationship with real gross domestic product (RGDP). It was recommended amongst others that in order to increase the contribution of foreign investment, government through the monetary policy authority (CBN) should make the exchange rate stable, attractive and available for investors. This will enable investors to access more foreign currency that will help them purchase both raw materials and finished goods. This situation will improve export of goods and service, investment across the border will equally increase. This will lead to increase in the country's economy. Investors should also source raw materials locally which will enhance activities of the domestic market. This situation will reduce the unemployment rate and contribute massively to the local economy.