An assessment of FDI’s economic impact on Nigeria’s service sector: Evidence from Abuja (2000–2020).
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Background of the study:
Foreign Direct Investment (FDI) has been a significant catalyst for economic growth, particularly in Nigeria’s service sector where it introduces capital, technology, and managerial expertise. In Abuja, FDI inflows between 2000 and 2020 have transformed key service industries such as banking, telecommunications, and hospitality (Nwachukwu, 2023). The injection of foreign capital has spurred technological upgrades, improved operational efficiencies, and facilitated the adoption of international best practices. These developments have enhanced competitiveness and expanded market reach, contributing to a more dynamic and diversified service economy. Nonetheless, challenges remain in the form of regulatory barriers, political instability, and infrastructural inadequacies that occasionally limit FDI’s transformative potential (Adamu, 2024). This study critically examines the economic impact of FDI on Nigeria’s service sector in Abuja by analyzing empirical data and policy outcomes. It seeks to uncover both the contributions and limitations of FDI and explore policy reforms that could further amplify its positive effects on the service industry.
Statement of the problem:
While FDI has contributed to the growth of Nigeria’s service sector, its overall impact in Abuja has been inconsistent. Regulatory hurdles, political uncertainties, and infrastructural shortcomings have prevented the full realization of FDI benefits, leading to sporadic improvements and uneven technological transfer (Nwachukwu, 2023; Adamu, 2024). These issues have resulted in disparities among service sub-sectors, limiting the overall competitiveness and innovation of the industry. This study aims to identify the barriers that constrain FDI’s effectiveness and propose policy recommendations to create a more conducive environment for foreign investment in the service sector.
Objectives of the study:
- To assess the economic impact of FDI on the service sector in Abuja.
- To identify the key challenges affecting FDI inflows in the service sector.
- To recommend policy measures to enhance the positive impact of FDI.
Research questions:
- How does FDI affect the growth and development of the service sector in Abuja?
- What are the main challenges hindering FDI’s impact on the service sector?
- What policy interventions can improve the benefits of FDI in the service industry?
Research Hypotheses:
- FDI significantly contributes to the growth of Nigeria’s service sector.
- Regulatory and infrastructural challenges negatively affect FDI’s impact.
- Policy reforms can enhance the positive effects of FDI in the service sector.
Significance of the study:
This study is significant as it provides a comprehensive analysis of FDI’s role in shaping Nigeria’s service sector, particularly in Abuja. By examining economic contributions and identifying challenges associated with foreign investment, the research offers valuable insights for policymakers and investors. The findings will assist in developing strategies to attract and sustain FDI, ultimately fostering a more competitive and innovative service industry (Adamu, 2024).
Scope and limitations of the study:
This study is limited to evaluating the impact of FDI on Nigeria’s service sector in Abuja, focusing on regulatory, infrastructural, and economic factors.
Definitions of terms:
- Foreign Direct Investment (FDI): Investment from foreign entities in domestic businesses.
- Service Sector: The segment of the economy that provides services rather than tangible goods.
- Economic Impact: The effect of an economic activity on overall economic growth, employment, and productivity.
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