Impact of Foreign Direct Investment from Multinational Corporations on Economic Growth in Nigeria (2015-2022): Evidence from Autoregressive Distributed Lag and Vector Error Models

The paper provides a comprehensive cointegration analysis of the FDI inflows and economic growth in Nigeria by assessing the economic relationship between the FDI inflows, the real GDP, Inflation rate and Unemployment rate between the periods 2015 to 2022 (representing the administration of Former President Buhari). All the utilized data were sourced from Central Bank of Nigeria (CBN) Statistical Annual Bulletin except for Unemployment rate which was sourced from National Bureau of Statistics (NBS) Labor Force Report 2022. The data consisted of time series variables, namely: FDI inflows, real GDP, Inflation Rate and Unemployment Rate of Nigeria. The data were quarterly time series and covered the periods of 2015 to 2022. Different analysis methods such as descriptive analysis (i.e. time series plots and summary statistics), the Mann-Kendall trend test, Johansen cointegration test, Augmented Dickey–Fuller (ADF) stationarity test, Granger causality test, autoregressive distributed lag (ARDL) model and variance decomposition analysis (VDA) were employed. The empirical findings from the Mann-Kendall test results revealed a significant decreasing trend in the FDI inflows. The findings infer MNCs investment in the country significantly dropped over the period. Furthermore, empirical findings from the Johansen cointegration results affirmed significant cointegration (i.e. causal relationship) between at most three (3) of the considered variables. Specifically, the Granger Causality results found the FDI inflows to significantly granger-cause (i.e. economically impact) the real GDP and vice versa, the unemployment rate to significantly granger-cause the RGDP and the FDI inflow, as well as FDI inflows to significantly granger-cause inflation rate. Consequently, empirical findings from the ARDL and VDA analysis significantly established a long-run causal relationship between FDI inflows and RGDP (the economy growth). Explicitly, the results found the FDI to significantly negatively impact the RGDP both in the short-run and long-run. As well as, the RGDP was found to significantly negatively impact the FDI inflow both in short-run and long-run. Thus, the study concludes FDI inflows in Nigeria have been poor and not been encouraging over the years and consequently the FDI had demonstrated to significantly and negatively impact the economic growth of the country in short-run and long-run. The study therefore recommends that the current government of President Bola Ahmed Tinubu should direct more investment into agricultural production, build road networks as well as improve transportation system in order to ensure significant drop in inflation in order to boost the productive capacity of MNCs investors, so that more direct foreign investors can come into the country.