Economic rationale for granting special incentives for attracting Foreign Direct Investment (FDI) is based on the belief that FDI bridges the 'idea gaps' between rich and the poor. Empirical literature however finds controversial, the effects of FDI on productivity growth. This paper contributes to the existing studies by applying the rho's rank correlation and causality test in exploring the possible links between FDI and economic growth in Nigeria. We determined the contributory factors to FDI and empirically tested the endogeniety theory of FDI. The study concluded that the link between FDI and economic growth in Nigeria is very weak. By disaggregating FDI data by sectors however, FDI was found to have contributed to economic growth in Nigeria. The study therefore recommends infrastructural development, human capacity building and strategic policies toward attracting FDI flow.
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Folorunso Sunday Ayadi (2010) studied this question.