Asymmetric Impact of FDI on Inclusive Growth in Nigeria

Abstract

This study investigates the asymmetric impact of Foreign Direct Investment (FDI) on inclusive growth in Nigeria over the period from 1991 to 2021. Non-linear autoregressive distributed lag (NARDL) model was employed. The findings of this study indicate that FDI has an asymmetric effect on inclusive growth in Nigeria. Positive changes in FDI inflows are found to have a significant and increasing impact on inclusive growth in the long run, while negative changes in FDI inflows are associated with a reduction in inclusive growth over time. Furthermore, the study reveals that the positive changes in FDI exert a greater influence on inclusive growth compared to negative changes. In addition, the study identifies other factors that impact inclusive growth in Nigeria. Gross fixed capital formation (GFCF) and the labor force are found to have a positive effect on inclusive growth, indicating their importance in driving economic development. Conversely, higher consumer prices are found to have a negative effect on inclusive growth, suggesting the need for policies to address inflationary pressures. Based on these findings, policymakers in Nigeria are recommended to prioritize policies that attract and retain foreign investors in sectors with high growth potential, particularly those that contribute to inclusive growth. Additionally, the Central Bank should implement monetary policies aimed at moderating the inflation rate to reduce economic risks and uncertainties that could deter potential foreign direct investors.