Impact of Foreign Direct Investment on Poverty Reduction in Nigeria

This study examines foreign direct investment and poverty reduction nexus. The objective of this study is to examine the impact of Foreign direct investment on poverty reduction in Nigeria for the period 1981-2022 using time series data obtained from the Central Bank of Nigeria. Household consumption expenditure served as proxy for poverty reduction (dependent variable), while foreign direct investment, gross fixed capital formation, real gross domestic product, trade openness, social, community services expenditure and inflation and dummy variable for democracy served as independent variables. The preliminary tests of descriptive statistics, correlation analysis, unit root tests were conducted on the data. The technique of Autoregressive Distributed Lagged Model (ARDL) and Granger Causality relationship were used for parameter estimation of the model. The time series data was found stationary at levels I(0) and at first difference I(1). The bound test cointegration test shows evidence of long run relationship among the variables. Result shows that FDI inflows has negative and insignificant impact on poverty reduction in Nigeria in the long run, though not statistically significant. There is a uni-directional causality relationship running from poverty to foreign direct investment over the period under study. The study recommends that government should invest more in the provision of education and incubation of knowledge-based technology needed for home-grown investment and provide adequate security of lives and properties that would engender trust in our society. These would ensure harnessing the positive effects of globalization for capital market development in Nigeria. Massive investment in physical infrastructure that would spur domestic investment and attract foreign direct investment is urgently needed in this country.