Attainment of Economic Growth in Developing Countries: A Comparative Analysis of Foreign Direct Investment Inflows in Ghana and Nigeria

Abstract

This study assessed the nexus between foreign direct investment and economic growth in Ghana and Nigeria over the period of 33years (i.e 1990-2022). It uses secondary source of data. The variables such as foreign direct investment, control of corruption, government effectiveness and real gross domestic product (proxy of economic growth) were employed in the study. The data were collated from World Development Indicator, 2023. The techniques such as descriptive statistics, correlation analysis, co-integration test, and Autoregressive Distributed Lag (ARDL) were conducted to analyze the data. The results of ARDL show the presence of short run interaction between foreign direct investment and real gross domestic product of Ghana while the result of long run interaction is inconclusive. However, long run relationship exists between foreign direct investment and real gross domestic product of Nigeria. As a result, the short run disequilibrium is corrected in the long run at 1% as reported by ECM. The study concluded that the relationship between foreign direct investment and economic growth in Ghana is found in the short run while that of Nigeria exists in the long run. It was therefore recommended among others that Ghanaian government should keep creating conducive environment for business and formulate favourable investment policy to attract investors into the country. In Nigeria, the policy makers should lessen the stringent conditions of property registration and tax payment as pointed out by the World Bank. This will help to create better atmosphere for businesses, thereby increasing the volume of the FDI inflows into the country.