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AN ANALYSIS OF THE TRENDS OF FOREIGN DIRECT INVESTMENT INFLOWS IN THE NIGERIAN CONSTRUCTION SECTOR

ABSTRACT

This study performed an analysis of the trends of foreign direct investment inflows in the Nigerian construction sector with a view to studying the pattern of flow and assessing the effect of increased flow of FDI on the industry. Annualized time series archival data from the central bank of Nigeria and the National Bureau of Statistics served as the data source. The data collected was analyzed using simple percentages, regression analysis, Duncan Multiple Range Test and Granger Test, while the hypotheses were tested with the aid of the f-test. Results revealed that there is poor flow (or an insignificant flow) of FDI into construction sector when compared to other sectors of the economy. According to Granger sense, the Granger Causality is bi-directional, suggesting that FDI is an important prerequisite and catalyst for sustainable growth and development in construction and on the other hand, the level of infrastructural facilities available on ground is a prerequisite for attracting foreign direct investors. A high positive correlation or significant relationship between FDI and the construction sector further corroborates this result. Based on the results and inferences , it was recommended that aside massive investment in infrastructure, the Nigerian government should also create the enabling environment, by devising policies, enforcing existing laws that will portray the country in a positive light, encourage foreign investors and ultimately attract the much needed FDI to boost the nation’s economic status.

CHAPTER ONE

INTRODUCTION

Background of the Study

The construction sector occupies a focal position in the economy of any nation because it is an important contributor to the process of development (Aje, 2008). In the conduct of economic activities, the construction sector is always used by government as the stimulus for the buoyancy of the economy (Akindoyemi, 2011). The construction industry is therefore a critical factor or variable of progress in the drive for economic advancement of nations, especially Less Developed Countries (LDCs) such as Nigeria. Nigeria no doubt requires substantial amounts of foreign investment in the construction sector to speed up her economic growth most especially in the area of building and construction infrastructure/facilities investment and to promote development, which will in turn boost GDP.

The significance of foreign capital for the provision of infrastructure development for both macroeconomic and microeconomic activities of the society, cannot therefore, be overemphasized.