Foreign Direct Investment and Nigeria's Non-Oil Sector Trajectories in the Post Covid-19 Era: A Simulation Approach

Abstract

The outbreak of COVID-19 pandemic has devastating consequences on the global economies with Nigeria inclusive. This has affected inflow of foreign capital across national frontiers and consequently the performance of macroeconomic variables in Nigeria. As a remedy to the devastating
consequences that the COVID-19 pandemic has presented, the Nigeria government has lunched the Economic Sustainability Plan (ESP) to galvanize
external investment sources such as Foreign Direct Investment (FDI) as one of the major response packages. This study therefore, examines the post COVID-19 impact of FDI inflow on non-oil sector trajectories in Nigeria. The study adopts the macroeconomic approach to foreign direct investment and the endogenous growth theory within a framework of a small macroeconometric model. A dynamic stochastic simulation was performed in determining the behavior of non-oil trajectories such as the agricultural output, manufacturing output and service output for both the within and outof- sample time horizon. it was found that 0.1 per cent increase in foreign direct investment in the post-COVID-19 era would bring about increase in non-oil trajectories such as agriculture, manufacturing and services outputs thereby leading to exports expansion, and boost in private consumption and investment clime in the economy. The study recommends provision of critical infrastructure that could lead FDI absorption, effective exchange rate management and provision of security of lives and property that would attract more foreign investors in Nigeria.