Foreign Direct Investment, Capital Flows, and Sectoral Growth in Nigeria: A Comparative Analysis of Agriculture and Manufacturing

Anthony Orji; Jovita Nneka Uwakwe; Onyinye Imelda Anthony-Orji; Jonathan Emenike Ogbuabor; Juliana Ngozi  Obiorah

doi:10.36923/ie-frontiers.v28i2.404

Open Access Article Economics Macroeconomics

Anthony Orji⁽¹⁾ , Jovita Nneka Uwakwe⁽²⁾ , Onyinye Imelda Anthony-Orji⁽³⁾ , Jonathan Emenike Ogbuabor⁽⁴⁾ , Juliana Ngozi Obiorah⁽⁵⁾

(1) Department of Economics, University of Nigeria, Nsukka, Enugu State, Nigeria,

(2) Department of Economics, University of Nigeria, Nsukka, Enugu State, Nigeria,

(3) Department of Economics, University of Nigeria, Nsukka, Enugu State, Nigeria,

(4) Department of Economics, University of Nigeria, Nsukka, Enugu State, Nigeria,

(5) Department of Economics, University of Nigeria, Nsukka, Enugu State, Nigeria

https://doi.org/10.36923/ie-frontiers.v28i2.404

Issue
Vol. 28 No. 2 (2025): Continuous

Submitted
August 28, 2025

Accepted
September 16, 2025

Published
September 23, 2025

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Abstract

The nexus between the agricultural sector, manufacturing sector, and FDI has been a topic of debate over the years. While the fundamental role of FDI in the growth of the overall economy has been widely recognized, findings of existing literature have remained unclear and inconclusive on how the impact of FDI varies across these distinct sectors, especially within the context of developing countries like Nigeria. This study aims to provide a comprehensive comparative analysis of the impact of FDI and other capital inflows on Nigeria’s agricultural and manufacturing sectors between 1980 and 2021. Using annual time-series data from the World Bank’s World Development Indicators (WDI) and the Central Bank of Nigeria (CBN), the study employs the Autoregressive Distributed Lag (ARDL) modelling approach. Four sector-specific ARDL models were specified, each subjected to extensive diagnostic and robustness checks to ensure the reliability of the estimates. The findings reveal a contrasting effect: while FDI exerts no statistically significant influence on manufacturing output, it has a strong and transformative impact on agricultural performance. In addition, other capital inflows, including official development assistance, development finance, and remittances, were found to significantly influence both sectors. The study concludes that FDI is not a universal driver of growth, and its effectiveness depends on sectoral characteristics, investment type, and policy environment. It contributes to the literature by offering one of the first sector-specific comparative analyses of capital flows in Nigeria, providing evidence to guide policies aimed at shifting the economy from consumption-driven patterns toward sustainable, production-oriented growth.

Keywords:

Foreign Direct Investment , Capital Flows, Agricultural Sector, Manufacturing Sector, Economic Growth, ARDL Model

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