Authors : Olusegun Omisakin, Oluwatosin Adeniyi and Ayoola Omojolaibi
Abstract: This study examines the empirical econometric evidence of both causal and long run interrelationships among foreign direct investment, trade openness and economic growth in Nigeria. While the study covers the periods from 1970-2006, the following real variables are employed: Output (Y), capital (K), Labour (L), Foreign Direct Investment (FDI) and Trade openness (Tr). The variables are expressed in their per capita form and the production function is also specified in a log-linear form. The study employs more robust econometric procedures by employing the Toda-Yamamoto non-causality test and the Autoregressive Distributed Lag (ARDL) technique to cointegration. The Toda-Yamamoto non-causality test reveals unidirectional causality running from foreign direct investment to output and trade openness to output. Having established a long run relationship among the variables when their vector is normalized on output, the ARDL cointegration procedure further suggests, however, that both foreign direct investment and trade openness are positively related to and significant in explaining output growth in Nigeria. Therefore, this study concludes by recommending, among other things, more trade openness and inflow of foreign direct investment for output growth dynamics in Nigeria.
Olusegun Omisakin, Oluwatosin Adeniyi and Ayoola Omojolaibi, 2009. Foreign Direct Investment, Trade Openness and Growth in Nigeria. Journal of Economics Theory, 3: 13-18.