RECONSIDERING TRADE AND INVESTMENT-LED GROWTH HYPOTHESIS: NEW EVIDENCE FROM NIGERIAN ECONOMY
RECONSIDERING TRADE AND INVESTMENT-LED GROWTH HYPOTHESIS: NEW EVIDENCE FROM NIGERIAN ECONOMY

Summary/Abstract: The need to revisit the trade and investment-led growth hypothesis in the case of Nigerian economy has become pertinent following the recent record drop of 15% in FDI inflows to West Africa. This fall in FDI flow to the region has been primarily attributed to the abysmal performance of Nigeria in attracting FDI as the largest economy in the sub-region despite an average rise in the rate of FDI flow to Africa as a continent at large. In this study, the trade and foreign direct investment-led growth hypothesis were revisited in the case of Nigerian economy. Our empirical findings provide evidence to support the trade-led growth hypothesis as trade measures were found to be significantly and positively impacting real economic growth in the reviewed period. In particular, the export-led growth hypothesis was upheld by the results. On the other hand, we have found mixed evidence on the investment-led growth hypothesis as only domestic investments demonstrated a significant positive impact on economic growth while FDI was not significant for economic growth in the country for the period under review. Thus, to harness the inherent benefits of inward FDI in the wake of dynamic trade relations, efficacious policy directions were provided with respect to the findings.

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