Abstract
The empirical objectives of this study are threefold. The first is to examine the relationship between aggregate inward Foreign Direct Investment (FDI) and the aggregate volume of exports of the Nigerian economy. The second is to investigate the effect of disaggregated (sectoral) FDI on the volume of exports in Nigeria. The final objective of this study is to examine empirically the effect of FDI on the export performance of domestically-owned firms at the firm level.To achieve the first objective, we use time series data on macroeconomic variables in Nigeria from 1980 to 2015. The ARDL cointegration technique is employed to examine the long-run relationship among the variables. The results reveal that aggregate FDI has a positive long-run relationship with aggregate exports. However, when exports are disaggregated into oil and non-oil exports, a different picture emerges. The results show that the positive relationship between FDI and exports in Nigeria holds only for oil exports. The relationship between FDI and non-oil exports is not statistically significant.
Since different sectoral FDIs may have different effects on the export performance of the host country, we further examine the relationship between disaggregated (sectoral) FDI and exports in Nigeria. The ARDL cointegration technique is also employed in this analysis, with FDI disaggregated into three broad sectors: primary sector FDI, manufacturing sector FDI, and service sector FDI. Meanwhile, exports are, again, classified into oil exports and non-oil exports. The results indicate that there exists a long-run relationship between the different sectoral FDIs and total exports. However, as in the first analysis, the results show that this long-run relationship holds only for oil exports, and not for non-oil exports. Examining the effects that the sectoral FDI might have on oil exports, it is found that only primary sector FDI and manufacturing sector FDI have a statistically significant positive effect on oil exports.
A final empirical objective of this study is to go beyond the macroeconomic outlook so as to examine, at the industry and firm level, the effect of inward FDI on the export performance of domestically-owned firms. Using firm-level survey data from 2007 to 2014 (obtained from the World Bank), we investigate whether Nigerian local firms start to export and/or increase the intensity of their exporting when foreign firms enter their sector. This firm-level analysis is limited to examining horizontal spillover, as the study focuses on the effect of FDI on domestic firms within the same sectors. The study found support for the existence of horizontal export spillover. The empirical results suggest that FDI presence increases the probability that domestic firms will export, however, FDI presence appears to have no effect on the export propensity or intensity of domestic firms.
The findings of this study provide an empirical assessment of the aggregate and disaggregated effect of FDI on the exports of a developing country, namely, Nigeria, and point to future policy changes that could enhance the gains that can be accrued from inward FDI. There is a need to focus on attracting not just FDI, but specifically, the type of FDI that aligns with the macroeconomic and development objectives of the host country.
| Date of Award | Jul 2019 |
|---|---|
| Original language | English |
| Awarding Institution |
|
| Supervisor | Glauco De Vita (Supervisor) & Yun Luo (Supervisor) |