Causality Nexus between the Nigerian Power Sector Output and Foreign Direct Investment

Abstract

The vacuum that the foreign direct investment (FDI) as a macroeconomic variable has the capacity to fill in economic transformation of nations especially in the face of gross inadequacy of investible capital can never be over emphasized. This paper has enlisted the analysis of multivariate Johansen Cointegration, Vector Error Correction model and Granger causality mechanism to explore the veracity of the nexus between the power sector output and the foreign direct investment (FDI) with time series process from 1971 to 2014. Moreover, the summary of the causality procedure between the power sector and FDI shows no causality. This implies economically that FDI inflow into the power sector is not only inadequate but not growth induced. It is on this premise we recommend that the authorities in charge of power should make the power sector a rallying point with proper integration into the mainstream of the economy and also take more evaluative measure to attract more FDI inflow to the power sector for stability and by extension overall economic growth of Nigeria.