FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN NIGERIA: A TEST OF CAUSALITY

Foreign Direct Investment (FDl) facilitates the growth of international production which provides an unprecedented opportunity for deyelpping countries to achieye faster Economic Growth through foreign investments. This paper examines the causal relationship between FDI. and Economic Growth in Nigeria for the period 1978-2007. The stationarity of the data series are tested using. Augmented Dickey-Fuller (ADF) and Johansen Co-integration test, and Vector Error. Correction Model fVEClyl). used for causality test. The study found that the FDI and Gross Domestic Product (GDP) are cointegrated while the VECM employed shows that causality run ? from GDP to FDI. Given the existence of long-run and the causal relationship, the paper recommends that effort: 'hoidd be made to attract FDI to other sectors that also contribute to GDP other than the extractive (oil) sector.