Abstract

The purpose of this study was to examine the link between Foreign Direct Investment (FDI) in Nigeria from 1970 to 2008. The stationary properties of the data and the order of integration of the data were tested using the augmented Dickey fuller (ADF) and the Philip – Perron (PP) tests. The cointegration results showed at least one cointegrating equation in the export function. The Granger – causality results suggest unidirectional causality running from (i) foreign direct investment to export; (ii) real exchange rate to export; (iii) trade balance to export and bidirectional causality from external market indicator to export. The study suggests that more policies should be channeled towards improving export oriented foreign direct investment and at the same time, efforts should be geared towards improving basic infrastructure which will not only lower production costs but improve upon the competitiveness of  the economy which will invariably  attract more foreign direct investment into the economy.

Key words: Foreign direct investment, exports, causality cointegration, error correction, augmented Dickey fuller.