IDEAS home Printed from https://ideas.repec.org/a/asi/aeafrj/2013p1479-1496.html
   My bibliography  Save this article

Foreign Direct Investment, Non-Oil Exports, and Economic Growth in Nigeria: A Causality Analysis

Author

Listed:
  • Kolawole Olayiwola

    (Department of Economics and Development Studies Covenant University, P.M.B. 1023, Ota, Ogun State, Nigeria)

  • Henry Okodua

    (Department of Economics and Development Studies Covenant University, P.M.B. 1023, Ota, Ogun State, Nigeria)

Abstract

The study examines the contribution of Foreign Direct Investment (FDI) to the performance of non-oil exports in Nigeria within the framework of the export-led growth (ELG) hypothesis. Available evidence in Nigeria supports that the bulk of FDI inflow into the country goes to the oil sector of the economy. From the perspective of efficiency-seeking FDI, foreign capital always aims at taking advantage of cost-efficient production condition. Given this fact, a causality analysis was undertaken in order to verify the relevance of the ELG hypothesis. Also, the dynamic interaction among FDI, non-oil exports, and economic growth is investigated using the concept of variance decomposition and impulse response analysis. The results obtained from the causality analysis revealed that a unidirectional causality runs from FDI to non-oil exports. Each of the three variables exhibited on the average and at the early stages of the out-of-sample forecast period, a dormant response to one standard deviation shock or innovation. However, they all demonstrated significant responses after some 7 years into the out-of-sample forecast period. The results also show that an encouragement of non-oil exports is a necessity for an effective FDI in Nigeria. Therefore, in designing policies towards this direction, policy response lag need to be taken into consideration.

Suggested Citation

  • Kolawole Olayiwola & Henry Okodua, 2013. "Foreign Direct Investment, Non-Oil Exports, and Economic Growth in Nigeria: A Causality Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(11), pages 1479-1496, November.
  • Handle: RePEc:asi:aeafrj:2013:p:1479-1496
    as

    Download full text from publisher

    File URL: http://www.aessweb.com/download.php?id=2147
    Download Restriction: no

    File URL: http://www.aessweb.com/archives.php?m=November&id=2147
    Download Restriction: no

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Judith Giles & Cara Williams, 2001. "Export-led growth: a survey of the empirical literature and some non-causality results. Part 2," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(4), pages 445-470.
    3. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January.
    4. Sharma, K., 2000. "Export Growth in India: Has FDI Played a Role?," Papers 816, Yale - Economic Growth Center.
    5. Dinda, Soumyananda, 2008. "Factors Determining FDI to Nigeria: An Empirical Investigation," MPRA Paper 28097, University Library of Munich, Germany, revised Nov 2010.
    6. Hendry, David F, 1986. "Econometric Modelling with Cointegrated Variables: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 201-212, August.
    7. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-228, August.
    8. Kishor Sharma, 2000. "Export Growth in India: Has FDI Played a Role," Working Papers 816, Economic Growth Center, Yale University.
    9. Henry Okodua, 2009. "Foreign Direct Investment and Economic Growth: Co-Integration and Casualty Analysis of Nigeria," The African Finance Journal, Africagrowth Institute, vol. 11(1), pages 54-73.
    10. Akinlo, A. Enisan, 2004. "Foreign direct investment and growth in Nigeria: An empirical investigation," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 627-639, July.
    11. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    12. Lionel Fontagné, 1999. "Foreign Direct Investment and International Trade: Complements or Substitutes?," OECD Science, Technology and Industry Working Papers 1999/3, OECD Publishing.
    13. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    14. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
    15. Judith Giles & Cara Williams, 2001. "Export-led growth: a survey of the empirical literature and some non-causality results. Part 2," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(4), pages 445-470.
    16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Omojolaibi, Joseph & Mesagan, Ekundayo & Olaifa, Adeyemi, 2015. "The Impact of Non-oil Export on Domestic Investment in Nigeria," MPRA Paper 70201, University Library of Munich, Germany.
    2. Chakraborty, Debashis & Mukherjee, Jaydeep & Lee, Jaewook, 2016. "Do FDI Inflows influence Merchandise Exports? Causality Analysis on India over 1991-2016," MPRA Paper 74851, University Library of Munich, Germany.
    3. A Alodadi & J Benhin, 2015. "Long Term Economic Growth in Oil-Rich Saudi Arabia: What is the role for non-oil sectors?," Economic Issues Journal Articles, Economic Issues, vol. 20(1), pages 109-130, March.
    4. Fakhri, Hasanov, 2010. "The Impact of Real Effective Exchange Rate on the Non-oil Export: The Case of Azerbaijan," MPRA Paper 29556, University Library of Munich, Germany.
    5. Bilal Kargi, 2014. "Portfolio In Turkish Economy, And A Long Termed Relation Between Foreign Direct Investments And The Growth, And The Structural Breakage Analysis (1980-2012)," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 6(1 (March)), pages 70-81.
    6. Wumi Olayiwola & Henry Okodua & Evans S. Osabuohien, 2014. "Finance For Growth and Policy Options for Emerging and Developing Economies: The Case of Nigeria," Asian Development Policy Review, Asian Economic and Social Society, vol. 2(2), pages 20-38, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:2013:p:1479-1496. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qazi Muhammad Imran). General contact details of provider: http://www.aessweb.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.