Foreign Direct Investment, External Debt and Economic Growth Nexus: Evidence from Nigeria

Abstract

The purpose of this research is to ascertain if inflow of FDI and external debt has significantly impacted the growth of the Nigerian economy from (1980-2017) using the ARDL-ECM framework. Data was extracted from the CBN Statistical Bulletin and WDI dataset of the World Bank. Results from the ARDL estimation output shows that foreign direct investment and external debt possessed a positive and significant effect on economic growth in Nigeria only in the short-run. On the other hand, results from the ARDL Bounds Test depicts an absence of a long-run relationship between foreign direct investment, external debt and economic growth in the case of Nigeria. The study recommended that borrowed funds acquired to finance capital and developmental projects should be properly channelled towards the actualisation and full implementation of such projects.