Perpetua Eghonghon OSUMAH

This study investigates the impact of foreign direct investment (FDI) on economic growth in Nigeria from 1981 to 2023, employing the Autoregressive Distributed Lag (ARDL) modeling approach. The study incorporates GDP growth rate as the dependent variable and FDI, interest rate, exchange rate, and inflation rate as explanatory variables. Descriptive statistics reveal moderate variability among the variables, while correlation analysis indicates a positive association between GDP growth and FDI, and a negative relationship with inflation. Unit root tests confirm that all variables are stationary at first difference, satisfying the preconditions for ARDL estimation. The ARDL bounds test results establish the existence of a long-run equilibrium relationship among the variables. Short-run dynamics show that FDI has both positive and negative effects on GDP growth across lags, suggesting that the impact of investment inflows is time-dependent. Exchange rate depreciation exerts a significant negative influence on economic growth, while inflation exhibits mixed effects depending on lag structure. The long-run estimates reveal that FDI, interest rate, exchange rate, and inflation have negative but statistically insignificant impacts on GDP growth, implying limited long-term contribution to growth within the study period. Diagnostic tests confirm the absence of heteroskedasticity and autocorrelation, validating the robustness of the model. The study concludes that FDI, though influential in the short run, does not significantly drive long-term growth unless supported by stable macroeconomic conditions. It recommends that policymakers enhance the investment climate, ensure exchange rate stability, and implement consistent macroeconomic policies to attract productive FDI and sustain economic growth in Nigeria.