FOREIGN DIRECT INVESTMENT AND WELFARE IN NIGERIA: EVIDENCE FROM ARDL MODEL

Abstract

This study examined the effect of foreign direct investment on wellbeing in Nigeria from 1986 to 2021. Human development index was used to measure welfare while FDI inflows were used to measure foreign direct investment. Exchange rate (EXCH), inflation rate (INF), domestic investment (lnDI), trade openness (TOP), and corona virus (COVID19) were used as the study's control variables. To test for stationarity, a unit root test was performed using Augmented Dickey Fuller (ADF) and Philip Perron. According to the results of the unit root test, the exchange rate and trade openness were stationary at first levels, whereas the human development index, foreign direct investment inflows, the inflation rate, and domestic investment were stationary at levels. In order to examine for a long-term partnership, the ARDL bound test was used. According to the study, there is no significant long-term relationship between welfare and foreign direct investment. The outcome of co-integration and long-term analysis demonstrates that inflation and exchange rates have a negative, significant impact on the human development index. Covid19 and trade openness have insignificant effect on the human development index. Inflows of foreign direct investment and domestic investment have significant positive impact on the human development index. According to the research, Nigeria has to take the battle against corruption seriously. The amount to which foreign direct investment is misappropriated for personal gain would be constrained if corruption were to be reduced.