The Dynamic Influence of Foreign Direct Investment and Industrial Output On Economic Development in Nigeria: An ARDL Model Analysis
Abstract
Widely acknowledged as essential to economic development are Foreign Direct Investment (FDI) and industrial output, while productivity remains at the heart of how firms and national economies perform. This research examines how FDI and industrial output affect Nigeria's economic development, employing the Autoregressive Distributed Lag (ARDL) model. It investigates if progress in FDI and industrial output has resulted in enduring economic growth, both on their own and through their combined (interactive) effects. The analysis utilises annual time series data comprising 42 observations from 1981 to 2023, sourced from the World Bank's Development Indicators (2023) and the Central Bank of Nigeria's Annual Statistical Reports. As key independent variables, the model includes FDI and industrial output, along with control variables of government expenditure (GOVEXP) and gross fixed capital formation (GFCF). The annual growth rate of real GDP serves as a proxy for economic development. The empirical findings demonstrate that both FDI and industrial output positively influence economic development in both the short term and the long term. While the impact of FDI is statistically significant, the relationship between FDI and industrial output is not statistically significant. Of greater significance is the finding that the interactive (moderated) effect of FDI and industrial output on economic development is negative and statistically insignificant in both the short term and long term. This implies that the synergy between FDI and industrial productivity has not yielded practical improvements in economic performance. The study recommends that the government implement measures to improve, protect and empower domestic industries, support innovation and SMEs, develop infrastructure for industrial growth, encourage innovation and technology adoption, strengthen backwards and forward linkages, and monitor and evaluate FDI-industry outcomes in Nigeria.
Keywords
Economic Development, Foreign Direct Investment, Government Expenditure, Gross Fixed Capital Formation, Industrial Output
Citations
IRE Journals:
Segun Amos ADEWALE , Abayomi JAPINYE
"The Dynamic Influence of Foreign Direct Investment and Industrial Output On Economic Development in Nigeria: An ARDL Model Analysis" Iconic Research And Engineering Journals Volume 9 Issue 1 2025 Page 1228-1246
IEEE:
Segun Amos ADEWALE , Abayomi JAPINYE
"The Dynamic Influence of Foreign Direct Investment and Industrial Output On Economic Development in Nigeria: An ARDL Model Analysis" Iconic Research And Engineering Journals, 9(1)
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