Rebecca Folake Bank-Ola, Abel Abiodun Akintaro, Michael Olamide Adediwura


Foreign direct investment in Nigeria is poised to expose the real sector to latest capital equipment purchase, human capital development, growth processes facilitation, technological advancement and eventual economic development; but inconsistency in policies, political instability and continual dependence on earnings from oil, hindered the sectorial growth, leading to decline in output and closure of some businesses. This necessitated the study to examine the impact of foreign direct investment on manufacturing output in Nigeria from 1986 to 2018. Foreign direct investment, trade openness, gross fixed capital formation and inflation on consumer prices were the independent variables while manufacturing output was the dependent variable. The Auto-Regressive Distributed Lag (ARDL) model was employed using time series data. The results of the analysis showed that foreign direct investment has a positive effect on the country’s manufacturing output. Inflation on consumer prices also has a positive effect, whereas trade openness and gross fixed capital formation were negative on manufacturing output. The conclusion derived from the results is a positive though insignificant relationship between foreign direct investment and manufacturing output in Nigeria while the reverse holds for trade openness and gross fixed capital formation. The recommendation is that the Nigerian government and policy formulators should embrace productivity enhancement of the manufacturing sector by implementing investor friendly policies geared towards attracting, encouraging, promoting and retaining foreign direct investment within a conducive and enabling environment, thereby making the sector more vibrant.


Foreign Direct Investment, Manufacturing Output, Trade Openness, Inflation, Auto-Regressive Distributed Lag Model.

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