Benue State University, Makurdi

FOREIGN DIRECT INVESTMENT AND THE MANFUCATURING OUTPUT IN NIGERIA: A PRE AND POST SAP ANALYSIS SECTOR

Andohol Jerome Ph.D and Usar Terzungwe

Abstract

The study investigated the relationship between Foreign Direct Investment and Manufacturing industries within the pre and post-SAP framework. The Chow test provided justification for splitting the data into the pre and post-SAP framework. Ordinary least squares (OLS) and the Cochrane-Orccut transformation was used to estimate the model in the pre-SAP era, while the Granger Representation Theorem and VECM were used for the post-SAP era. The CochraneOrcutt results show that FDI has a positive and significant impact on Manufacturing Sector Output in the pre-SAP era, and the Engle-Granger cointegration ascertained the existence of a long run relationship among the variables. The vector error correction model estimated the long run relationship between FDI and the manufacturing industries performance and also reported a positive relationship between Foreign Direct Investment and Manufacturing Sector Output. The causality test of the variables for the two periods shows no causality between FDI and the Manufacturing Sector Output in the pre-SAP era and bidirectional causation in the post-SAP era. The study therefore, recommends that the government of Nigeria should as a matter of priority contain insurgency in the country so as to attract foreign direct investment into Nigeria. The study also recommends expedient action from the government to encourage the manufacturing sector through incentives such as favorable policies, tax holidays and adequate policing of the nation’s borders to prevent dumping in the economy.

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