ABSTRACT:

This study sets out to investigate the impact of foreign direct investment ( FDI) on economic growth in Nigeria, between 1985 and 2011.  The methodology adopted in the study was influenced by prevalent economic theory which postulates that foreign direct investments and economic growth may be jointly determined in an economy. Consequently, this study adopted simultaneous equation models and single equation models of regression to analyse the relationship between economic growth and foreign direct investments and to identify whether democracy helps the flow of foreign direct investment in Nigeria. The results obtained show that FDI and economic growth are jointly determined in Nigeria, and there is positive feedback from FDI to growth and from growth to FDI in Nigeria. Furthermore, the results identified major determinants of FDI in Nigeria as Gross Domestic Product (GDP), human capital, population, interest rates and Exchange rates. The result also showed that FDI and democracy have positive relationship in Nigeria. Economic growth can be further enhanced with more FDI, therefore relevant authorities should strongly improve efforts at attracting more foreign direct investments.