Foreign Direct Investment, Money Supply, and Economic Growth in Nigeria: Evidence from an Autoregressive Distributed Lag (ARDL) Approach (2010Q1–2023Q4)

Abstract

Purpose: This study examined the relationship between foreign direct investment (FDI), money supply, and economic growth in Nigeria using quarterly data from 2010Q1 to 2023Q4. It addresses the persistent debate and mixed empirical evidence regarding the long-run and short-run effects of FDI and monetary policy on economic growth. Methodology: An ex post facto research design was adopted. Quarterly secondary data were obtained from the Central Bank of Nigeria Statistical Bulletin (2024). The Autoregressive Distributed Lag (ARDL) model was employed to examine both the short-run and long-run relationships among the variables. Results: The findings revealed that FDI has no significant long-run effect on economic growth but exerts a positive and statistically significant impact in the short run. In contrast, money supply has a significant positive long-run effect on economic growth, while its short-run effect is negative and statistically significant. Novelty and Contribution: This study contributes to the literature by providing updated quarterly evidence spanning 2010Q1–2023Q4 and distinguishing between the short-run and long-run effects of FDI and money supply on Nigeria's economic growth using the ARDL framework. Practical and Social Implications: The findings suggest that policymakers should promote sector-specific FDI incentives targeting manufacturing, agro-processing, and technology to enhance sustainable growth. Additionally, the Central Bank of Nigeria should align money supply expansion with real sector output through effective monetary policy measures to control inflation and foster long-term economic stability.