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FDI, private investment and public investment in Nigeria: An unravelled dynamic relation

Author

Listed:
  • Amassoma Ditimi

    (Department of Economics and Development Studies, Faculty of Humanities and Social Studies, Federal University Oye-Ekiti, Ekiti State, Nigeria)

  • Ogbuagu Matthew I.

    (Graduate Assistant, Department of Economics and Development Studies, Faculty of Humanities and Social Studies, Federal University Oye-Ekiti, Ekiti State, Nigeria)

Abstract

For decades, scholars have continually emphasized the importance of FDI in the less developed countries. Some believe that FDI can fill investment gaps, either private or public and mobilizes savings (Lee and Suruga, 2005; Todaro and Smith, 2003; Hayami, 2001). This study seeks to verify the interactions and transmission mechanism between FDI, private direct investment and public direct investment in Nigeria. Furthermore, these variables were examined to ascertain their direction of causality and whether or not they have long run linear relationship. Also, the impulse responses of these variables to shocks in the extraneous variables were verified; using the Multiple-Equation VAR models with time series data ranging from 1970-2012. The co-integration result indicates that there is no long run relationship between these variables. In addition, the variance decomposition result shows that 46 percent of innovations in FDI were explained by its own past values, while 21 percent of the innovations were due to shocks, to private domestic investment with 31 percent due to public investment. The response of public and private investment to shocks in FDI is positive and significant in the short run and so is consistent with the findings of Jansen (1995), Misun and Tomsik (2002). Efficient infrastructure in terms of public investment in basic infrastructure cannot be overemphasized amongst others.

Suggested Citation

  • Amassoma Ditimi & Ogbuagu Matthew I., 2015. "FDI, private investment and public investment in Nigeria: An unravelled dynamic relation," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 3(5), pages 10-18, October.
    • Handle: RePEc:lrc:lareco:v:3:y:2015:i:5:p:10-18
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    Citations

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    Cited by:

    1. Evans S. Osabuohien & Ayobami O. Soogun & Ese Urhie, 2017. "Examining the Relative Roles of Domestic and Foreign Direct Investments in Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 365-371.
    2. Garedew Aweke Gizaw & Negash Haile Dedeho & Tariku Lorato Lodamo, "undated". "The nexus between foreign direct investment, domestic investment and economic growth: Evidence from Ethiopia," Review of Socio - Economic Perspectives 202188, Reviewsep.
    3. Eslon Ngeendepi & Andrew Phiri, 2021. "Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region?," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 19(1 (Spring), pages 3-25.

    More about this item

    Keywords

    Endogeneity; FDI; Impulse response; VAR Model; Variance Decomposition; Nigeria.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • N77 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Africa; Oceania

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