Effects of Foreign Direct Investment on the Economy of Nigeria: A Disaggregation of the Real Sector Investigation

This research investigates the effects of foreign direct investment in agriculture, manufacturing, solid minerals, telecommunication, petroleum resources, power and construction sectors on the economy of Nigeria using annual data from1986 to 2014 that was sourced from the Central Bank of Nigeria Statistical bulletin. Co-integration test and error correction mechanism were adopted in estimating the effects of long run and the parsimonious short run dynamics of the variables under investigation. The research findings show that in the long run, FDI in agriculture, manufacturing, telecommunication, petroleum resources and construction sectors have significant effect on the economy of Nigeria. The results of the parsimonious short run dynamics revealed that FDI in manufacturing, telecommunication and petroleum resources have positive and significant effect. On the other hand, FDI in agriculture, solid minerals, power, and construction sectors have positive but insignificant effect on the economy of Nigeria. This study recommends policies that will provide effective risk management mechanism to protect investors and assist in encouraging the provision of infrastructural facilities to attract FDI in non-oil sector such as agriculture, power and solid minerals into the country. The study further recommends that distortions caused by government procedures and policies should be removed to foster good business climate for the inflow of foreign direct investment in Nigeria.