Foreign Direct Investment and The Growth of The Service Sector in Nigeria (2010-2024)

Abstract

This study examined the effect of foreign direct investment (FDI) on the growth of the service sector in Nigeria with a specific focus on the information and communication, telecommunications, and trading subsectors from 2010-2024. The objectives were to examine the effect of FDI inflows on the growth of the information and communication sector, determine the effect of FDI inflows on the growth of the telecommunications sector, and assess the effect of FDI inflows on the growth of the trading sector. The study adopted an ex-post facto research design and relied on secondary data obtained from the National Bureau of Statistics (NBS) covering a fourteen-year period from 2010 to 2024, while data analysis was carried out using the Autoregressive Distributed Lag (ARDL) model. The findings showed that FDI inflows to the information and communication sector exerted a positive but statistically insignificant effect on sectoral growth (β = 2614.39, p = 0.3770), FDI inflows to the telecommunications sector had a negative and statistically insignificant effect on sectoral growth (β = -467.92, p = 0.2111), and FDI inflows to the trading sector exhibited a positive but statistically insignificant effect on sectoral growth (β = 1839.64, p = 0.6797). In conclusion, the study established that FDI did not have a statistically significant role in driving the growth of Nigeria’s service sectors within the study period, as sectoral expansion was largely explained by internal dynamics such as past performance, domestic demand, and macroeconomic conditions. The study therefore recommends that policymakers should prioritize strengthening the enabling environment through improved infrastructure, regulatory reforms, and macroeconomic stability, while also enhancing the absorptive capacity of the service sectors to maximize the developmental effect of foreign investment inflows.