DETERMINANTS OF FOREIGN DIRECT INVESTMENT (FDI) AND MANUFACTURING GROWTH IN NIGERIA (1980–2023)

ABSTRACT Foreign Direct Investment (FDI) is widely regarded as a catalyst for industrial growth and economic diversification in developing economies. In Nigeria, however, the manufacturing sector has remained weak despite several reforms intended to attract FDI and stimulate industrialization. This study identifies, examine and evaluate the determinants of FDI and their influence on manufacturing growth in Nigeria from 1980 to 2023. The research employed an ex-post facto design using secondary time series data sourced from the Central Bank of Nigeria (CBN) and the World Bank. The data were subjected is both pre-estimation tests and post-estimation tests; The pre-estimation adopted was ADF, this was to ascertained the stationary of the adopted variables and the descriptive statistics analysis. Econometric methods adopted include the Augmented Dickey-Fuller unit root test, the Autoregressive Distributed Lag (ARDL) bounds test, and the Error Correction Model (ECM) were applied to establish both short-run and long-run dynamics among the variables. The results indicated that manufacturing output, FDI inflows, exchange rate, inflation and trade openness share a long-run equilibrium relationship. In the short run, FDI, infrastructure, and trade openness exert positive and statistically significant effects on manufacturing growth, while exchange rate depreciation and inflation negatively affect the sector. The ECM coefficient confirms a strong adjustment mechanism, with about 62% of disequilibrium corrected annually. In the long run, trade openness was found to be the most significant determinant of manufacturing growth. The study concluded that although FDI can support Nigeria’s manufacturing sector, its impact is hindered by macroeconomic instability, inadequate infrastructure. The study recommends and sustained investment in infrastructure, exchange rate stability, inflation management, and trade-driven industrial reforms as strategies to enhance the role of FDI in fostering sustainable manufacturing growth. Keywords: FDI, Manufacturing Growth, ARDL, ECM, Economic Development.