The Effects of FDI on the Performance and Stability of the Economies: Evidence from Nigeria and South Africa

This study examine the connections between foreign direct investment and economic growth using sample data covering the period of 1971 to 2013 on the Nigerian and South African economies by employing the Johansen Co-integration and Vector Error Correction (VECM) as estimation techniques. The results suggest that FDI is not a strategic driver for growing the economy in both the long and short- terms of the Nigerian economy whereas Openness, labor and physical capital have positive impact. The findings also display that openness does not have any impact on productivity in either the short or long- term periods whereas Foreign Direct Investment, Physical capital and labor have positive influence on growing the economy in the case of the South Africa. As a result of this finding there is need for expanding the labor force and focusing policy on education to promote the standard of human capital as well as physical capital and promote policies that encourage flow of FDI into these economies. Keywords: economic growth, FDI, physical capital, labor, openness, co-integration,