FOREIGN DIRECT INVESTMENT AND OUTPUT PERFORMANCE: EVIDENCE FROM NIGERIA

Abstract

 This study investigates the effects of FDI on the output of goods and services in Nigeria between 1981 and 2018.The research developed a structural macroeconometric model consisting of output sector block. The model deploys 7 simultaneous equations to capture the required proxies. The research adopted a three-stage least squares (3SLS) technique and macroeconometric model of simultaneous equations to capture the disaggregated impact of FDI on the output sector of the economy. The study found that FDI has positive effect on components of output sector like agriculture, manufacturing, oil and gas building and construction, retails and services sector.  The finding shows that although FDI has a significant impact on the components of the output sector but the growth effects of FDI differ across variables. This indicates that a proper and coordinated flow of FDI to this sector would provide employment, raw materials for the industrial sector and foreign exchange earnings for the economy which would improve the country’s balance of payments.  The study recommends that government should provide favourable environment for FDI inflow so that goods produced can replace imports of goods and services; this will provide employment and curb the balance of payments disequilibrium