The causal link between foreign direct investment, export and economic growth in Nigeria: an application of granger causality

This study examined the nature of causality, the impact and relationship between foreign direct investment (FDI), export, and economic growth in Nigeria. Granger causality analysis was used to test the hypotheses causal link between foreign direct investment and economic growth; export and economic growth, while, correlation analysis and Ordinary Least Square (OLS) were used to determine the relationship and the significant effect of FDI and export on economic growth. Our data were extracted from Central Bank of Nigeria (CBN) for a period of 29 years (1981-2010) both years inclusive. After testing for stationarity of the time series, the study revealed no directional-causality between FDI and GDP as well as export and GDP. However, there are evidence of positive relationship between FDI, export and GDP as well as a significant effect of export on GDP. Given the lack of non-directional causality between FDI, export and GDP, Nigerian government should encourage domestic investments through prudent fiscal and monetary policies geared towards achieving economic growth that will attract FDI and encourage exports.