Citation:

Miftahu Idris, Habiba Abubakar Bawa. "Unpacking the Nexus between Foreign Direct Investment and Poverty Level in Nigeria" International Research Journal of Economics and Management Studies, Vol. 5, No. 9, pp. 01-11, 2026. Crossref. https://doi.org/10.56472/25835238/IRJEMS-V5I9P101

Abstract:

Given the incidence of poverty in Nigeria, the need arises to investigate how responsive poverty is to FDI inflows. The trend of FDI in Nigeria reflects the country's economic and political situation, as well as global and regional factors that shape the investment climate. The study examines the nexus between foreign direct investment and poverty level in Nigeria spanning from 1984 to 2022. The study utilised secondary data and adopted the Augmented Dickey-Fuller Unit Root Test, the Granger causality technique, and the Autoregressive Distributed Lag model, which is robust to heteroscedasticity and autocorrelation. The result on FDI_INFLOW indicates a negative and positive coefficient at lag 2. This means that a one percent increase in FDI_OUTFLOW level results in a 0.04 percent increase in poverty in Nigeria in the short run. This implies that FDI net outflow enhances poverty. The cointegration equation indicates the speed at which the economy can recover to the equilibrium position. The coefficient indicates that the economy will recover at a 63% speed of adjustment to the equilibrium position. Findings suggested that inward foreign direct investment had a significant and negative impact on poverty in Nigeria. Also, the findings indicated that outward foreign direct investment is positive but not significant. The Granger causality test results indicate that a two-way causal relationship exists: poverty Granger-causes foreign direct investment, and foreign direct investment Granger-causes poverty. This implies a bidirectional causality. The study's results have provided important insights. The results indicate that inward foreign direct investment reduces the poverty rate in Nigeria. Therefore, the study recommended that foreign direct investment inflow is critical to reducing poverty. Therefore, foreign direct investment inflows should be enhanced to stimulate economic growth in Nigeria.

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Keywords:

Foreign Direct Investment (FDI), Poverty Level, FDI Inflows, FDI Outflows, Economic Growth, Granger Causality, ARDL Model, Nigeria, Cointegration, Poverty Reduction.