Impact of Foreign Direct Investment on Employment and Unemployment Rate in Nigeria: Application of Vector Autoregression(VAR) Models (1960-2014)

Main Article Content

Ajayi, Abdulhakeem
Rafiu Olayinka Akano
Samuel Olorunfemi Adams


Unemployment is one of the major problem affecting Nigeria’s economy and its’ society, the rate of unemployment have increased over the years. This study’s aim is to investigate the impact of Foreign Direct Investment (FDI) on the employment and unemployment rate in Nigeria. The study useyearly data on employment and unemployment rate collected from CBN Statistical Bulletin, National Bureau of Statistics and World Bank Indicators for the period 1960 – 2014 to achieve its objective and all analysis were done with E-view 9.5. The study employ Vector Autoregression (VAR) to model the employment and unemployment rate in Nigeria. The findings of the study suggested that FDI had a significant and positive impact on employment, FDI Granger-cause employment, employment Granger-cause FDI, unemployment Granger-cause employment and employment also Granger-cause unemployment. Also unemployment Granger-cause FDI and FDI Granger-cause unemployment.This implied that FDI has a significant role on employment rate in Nigeria and this should not be minimized. The study therefore recommended that policies should be formulated to exploit the role of FDI on employment in Nigeria, in an attempt to reduce the unemployment rate.

Employment, foreign direct investment, granger-cause, unemployment, VAR.

Article Details

How to Cite
Abdulhakeem, A., Akano, R., & Adams, S. (2019). Impact of Foreign Direct Investment on Employment and Unemployment Rate in Nigeria: Application of Vector Autoregression(VAR) Models (1960-2014). Asian Journal of Advanced Research and Reports, 6(1), 1-15.
Original Research Article


Hill S, Lester M, Nordas HK. Trade and Labour Market Adjustment. OECD Trade Policy Determinants. UNECA Workshop of Systems and Mobilization in Africa; 2004.

OECD Organisation for Economic Cooperation and Development Economic Outlook. 1995;1.

IMF. International Monetary Fund Annual Report;1999.

Adeoye A. Macro-economic level corporate Governance and FDI in Emerging Markets: Is there a close Relationship? J. Economic and International Finance. 2009;1(12):030-043.

Hisarciklilar M, Karakas DG, Asici AA, Can FDI Be A Panacea For Unemployment? The Turkish Case. Working Papers Series; 2010.

Dunning and Rugman. The Influence of Hymer’s Dissertation on the Theory of Foreign Direct Investment, American Economic Review. 1995;75(2): 228–232.

ILO. International Labour Organization’s World Employment Report; 2001.

Patterson CE, Okafor EW. Globalisation and Employment Generation: Evaluating the impact of trade on aggregate employment in Nigeria's industrial sector. In NSE, Employment Generation in Nigeria Ibadan: Nigerian Economic Society. 2006; 309-339.

World Bank. The World Bank Annual Report; 1993.

Pianta M, Vivarelli M. Unemployment, structural change and globalization. Working papers, No. 64. Paris: Organisation for economic co-operationand development; 2006.

Kareem OI. Globalisation and employment in developing countries. In NSE, Employment Generation in Nigeria: Selected papers for the 2006 Annual Conference Ibadan: Nigerian Economic Society. 2006;341-357.

Progressive Policy Institute. Unemployment Rates are Highest in the Middle East; 2006.
(Retrieved November 23, 2008, from Progressive Policy Institute)

Uche MO, Fidelis OO. Can Economic growth, foreign direct investment and exports provide the desired panacea to the problem of unemployment. Journal of Economics and Sustainable Development. 2013;4(1).

Ayodeji and Liu. An evaluation and forecast of the impact of foreign direct investment in Nigeria's agriculture sector in A VAR Environment. Journal of Economics and Sustainable Development. 2013;4(10).

Jugurnath B, Chuckun N, Fauzel S. Foreign direct investment & economic growth in Sub-Saharan Africa. An Empirical Study, Theoretical Economics Letters. 2016;6:798-807.

Haseeb M, Nira Hariyatie Hartani NH, Abu Bakar N, Azam M, Hassan S. Exports, foreign direct investment and economic growth: Empirical Evidence from Malaysia. (1971-2013), Theoretical Economics Letters. 2016;6:798-807

Olofin OP, Aiyegbusi OO, Adebayo AA. Analysis of foreign direct investment and economic growth in Nigeria: Application of Spatial Econometrics and Fully Modified Ordinary Least and Square (FMOLS), SAGE Journals. 2019;54(3): 129-158.

Akinyemi AA, Isiaka AM, Olusogo MI, Ogunleye OO, Adeyemi OA. Foreign direct investment and economic growth in nigeria revisited: A Sector Level Analysis, NileJBE. 2018;10:69–85.

KoladeOmoniyiAlabi. The impact of foreign direct investment on economic growth: Nigeria Experience. Open Journal of Applied Sciences. 2019;9:372-385.

Owutuamor Z, Arene CJ. The Impact of Foreign Direct Investment (FDI) on Agricultural Growth in Nigeria (1979- 2014). Review of Agricultural and Applied Economics (RAAE). 2018;21(1): 40–54.

Ekine DI, Ewubare DB, Ajie C. The relationship between foreign portfolio investment, foreign direct investment and economic performance of nigerian economy: (1980-2017): An Empirical Analysis. IOSR Journal of Economics and Finance. (IOSR-JEF). 2019;10(4):57-64

William CG, Agyapong WE, Abass A. Foreign direct investment in Africa and trade policy openness in Sub-Saharan Africa, Munich Personal Repec Archive (MPRA): 2004;1-18.

Sim CA. Macroeconomics and reality. Econometric Society. 1980;48(1): 1–48.

Luetkepohi H. Vector Auto-regressive (VAR) model EUI Working Papers, ECO.


Fabozzi FJ. Institutional investment management: Equity and bond portfolio strategies and applications, New Jerscy, John & Sons Inc; 2009.

Granger CWJ. Some recent development in a concept of causality. Journal of Econometrics. 1988;39:199-211.

Engle RF, Granger CWJ. Co-integration and error correction: Representation, Estimation, and Testing. Econometrica. 1987;55:251-76.

Johansen S. Likelihood-based inference in cointegration vector autoregressive model. Newyork Oxford University Press; 1995.

Abdulhakim AA, Trek Z. The effects of foreign direct investment on economic growth in Libya: A causality analysis. Open Science Journal. 2016; 1(2):1–15.

Allen MP. Understanding regression analysis, New York, Springer Science & Business Publications; 2004.

Sheather SJ. A modern approach to regression with R, New York, Springer Publications; 2009.

Baltagi BH. Econometrics, New York, Springer Publications; 2011.

Olayiwola K, Okodua H. Foreign direct investment, Non-oil exports and economic growth in Nigeria: A Causality Analysis Department of Economics and Development Studies Covenant University. Ota, Nigeria; 2009.

WANG W. Stochasticity, nonlinearity and forecasting of streamflow processes, Delft University Press, IOS Press Publications; 2006.

Dickey DA, Fuller WA. Distribution of estimators for autoregressive time series with a unit root. Journal of American Statistical Association. 1979;74(366):427– 431.