International Journal of Sub-Saharan African Research (IJSSAR)

Background: Foreign direct investment (FDI) is the term that describes investment from one country into another country. Over the decades, the Nigerian government adopted several policies to attract FDI into the national economy. Despite the effort of government to attract foreign Direct Investment to boost its manufacturing sector, the sector’s contribution to GDP remains low compared to other sectors. It is on this premise that the study investigated the impact of foreign direct investment on manufacturing sector in Nigeria.
Objective: This study investigated the impact of FDI inflow on the growth of the manufacturing sector in Nigeria.
Method: This study adopted ex-post facto research design. Data were sourced from CBN statistical bulletins. Analysis was done using autoregressive distributed lag (ARDL) model. Results: The study found that foreign direct investment (FDI) has a larger impact on manufacturing output than manufacturing capacity utilisation rate and manufacturing exports respectively. The impact of foreign direct investment on manufacturing output was especially larger in the short run than in the long run in Nigeria.
Conclusion: The study concludes that manufacturing sector in Nigeria has been struggling to achieve significant growth owing to the fluctuations in FDI inflows in Nigeria.
Unique Contribution: This study provides a fresh insight into manufacturing sector as a key sector for economic diversification and as well provides insight into other factors such as domestic savings and investment affect manufacturing sector growth in Nigeria.
Key Recommendation: The study recommends that government should create more means of attracting FDI and provide the infrastructure required for quality investment.