Foreign Direct Investment for Sustainable Economic Growth in Nigeria: Factor Analytic Approach

Abstract

Nigeria has put in place an elaborate foreign direct investment policy in order to attract foreign investors. As the largest economy in Africa, Nigeria has become a final destination for foreign investors. Currently, Nigeria is the single largest recipient of FDI in Africa. Nigeria seeks to diversify its revenue base with the active participation of MNCs and so reduce overdependence on oil. The recent crash in the international oil price has caused deep abrasion in the Nigerian economy thereby casting aspersion on the effectiveness of FDI to stimulate growth. This study focused on identifying key factors which influenced the contribution of FDI to economic growth in Nigeria. The study revealed that two potent factors namely public sector investment and marginal efficiency of capital influenced the contribution of FDI to growth in Nigeria while public sector investment was found to boost foreign capital, decl ining marginal efficiency of capital eroded the private capital of domestic firms which had low absorptive capacity to harness the sophisticated technology of MNCs. It was recommended, inter alia, that only a dynamic FDI policy that takes into cognizance the importance of public sector investment and marginal efficiency of capital can harness FDI to contribute maximally to growth.