MODELING OF THE EFFECTS OF FOREIGN DIRECT INVESTMENT AND INSTITUTIONAL QUALITY ON ECONOMIC GROWTH IN NIGERIA FROM 2005 TO 2024

Foreign Direct Investment (FDI) is widely recognized as a catalyst for economic growth, technological advancement and institutional development especially in developing countries. High quality institutions characterized by strong rule of law, low corruption, political stability, and efficient regulation, significantly boost economic growth and firm performance by reducing transaction costs and uncertainty. The specific objectives of the study are; to develop a model on the impact of foreign direct investment and institutional quality on economic growth in Nigeria from 2005 to 2024 and to ascertain the role of foreign direct investment and institutional quality in promoting economic growth in Nigeria from 2005 to 2024. Using multiple linear regression, a model for foreign direct investment and institutional quality on economic growth in Nigeria from 2005 to 2024 was obtained as  y=516.66414-13.76891x_1-122.23457x_2. The negative FDI coefficient aligns with findings by Akinlo (2004), and Olayiwola and Okodua (2013) for Nigeria, who attributed this to the concentration of FDI in the extractive sector and weak absorptive capacity. Such enclave FDI generates limited backward and forward linkages, causing Dutch disease effects through real exchange rate appreciation, and is characterized by high profit repatriation (Ayanwale, 2007). Also, Institutional quality has negative effect on economic growth in Nigeria for the period under review which implies that rule of law, control of corruption, regulatory efficiency etc. in Nigeria are still operating under low ebbs.