Foreign Direct Investment and Manufacturing Sector Performance in Less Developed Economy: Experience from Nigeria and Ghana
Abstract
This study comparatively analyses how foreign direct investment (FDI) affected the output of Nigeria’s and Ghana’s manufacturing sector from 1991 to 2023 respectively. The study uses manufacturing sector output as the regresand, FDI as the major regressor, and trade openness and exchange rate were utilized as checked variables. The data were sourced from Word Development Indicators. The nature of the series necessitated the use of ARDL techniques for both nations. Outcomes from the short-run ARDL model for both economies reveals that manufacturing sector output responds positively to FDI respectively. We observed that the ECM one period lag coefficient was negative and significant at 0.05 for each nation, indicating that the manufacturing sector output adjusts to changes in explanatory variables within a year. The ECMt-1 corrects 37.5% and 9.5% of the disequilibrium between static and short-run dynamic models of manufacturing sector output of Nigeria and Ghana respectively within a year on average. However, the Granger causality results exhibit unidirectional causal relationship running from FDI to Manufacturing sector output in Nigeria while for Ghana, there exist only one unidirectional causal relationship running from manufacturing sector output to exchange rate. The study found that the manufacturing sector play a pivot role in these less developed countries economic growth and development. Based on these findings, we recommend that the government should implement more practical policy actions that will help the national economy of both nations to attain maximum FDI inflow in an effort to achieve the process of economic development. Importantly, effort should be made to ensure investment-friendly environment in order to achieve the full potential of the FDI inflow which will in turn enhance development through the multiplier effect.
Keywords
Foreign Direct Investment, Trade Openness, Exchange Rate, Manufacturing Sector Output.
Citations
IRE Journals:
Lasisi Olapade Kehinde, Prof. Gbanador A. Clever, Dr. Nenbee G. Simeon "Foreign Direct Investment and Manufacturing Sector Performance in Less Developed Economy: Experience from Nigeria and Ghana" Iconic Research And Engineering Journals Volume 9 Issue 10 2026 Page 2198-2211 https://doi.org/10.64388/IREV9I10-1716645
IEEE:
Lasisi Olapade Kehinde, Prof. Gbanador A. Clever, Dr. Nenbee G. Simeon
"Foreign Direct Investment and Manufacturing Sector Performance in Less Developed Economy: Experience from Nigeria and Ghana" Iconic Research And Engineering Journals, 9(10) https://doi.org/10.64388/IREV9I10-1716645
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