Why South-South FDI is Booming: Case Study of China FDI in Nigeria

As economic linkage between south-south countries especially China with Nigeria have grown in intensity, it is seen as an engine to Nigeria economic growth. Therefore the amplified presence of China investment in Nigeria is now widely noticed and has drawn scrutiny from the populace raising questions of whether collaboration with the Asian giant is beneficial to the country and it developmental goals. This paper investigates why south-south foreign direct investment (FDI) is booming in Nigeria from 1992-2010 through the application of three-step procedures (Autocorrelation Function, Unit-root test and Granger Causality test). The results of the analysis affirmed the existence of autocorrelation and Unit-root with Granger causality showing that China FDI inflow is bidirectional with Gross Domestic Product (GDP) indicating a significant contribution in the economy growth of the country. In line with the findings to boost more foreign investment from China to Nigeria the research recommends, among other things, the creation of enabling investment climate and adequate macroeconomic policies in the country to ensure better productivity and sustainability of investment.