The study examines the applicability of the export-led growth (ELG) hypothesis using empirical
evidence from Nigeria. The bulk of FDI inflow into the country goes to the oil sector of the
economy. But FDI from the perspective of efficiency-seeking indicates that foreign capital always
aims at taking advantage of cost-efficient production condition. There is the general belief that this
motive is predominant in sectors where products are produced mainly for regional and global
markets and competition is mostly based on price and not on quality differentiation. In Nigeria, the
role of FDI in the non oil exports – growth nexus has hitherto been under-researched. This role
therefore is the major focus of this study. A causality analysis of the relevant variables was
undertaken in order to verify the relevance of the ELG hypothesis in the Nigerian economy.
Empirical evidence from available data failed to support the export-led growth hypothesis in Nigeria.
Besides, the dynamic interaction among FDI, non-oil exports, and growth of the Nigerian economy
was also investigated using the concept of variance decomposition and impulse response analysis.
The result of the variance decomposition supports an earlier result obtained from the causality
analysis which revealed that, a unidirectional causality runs from FDI to non-oil exports. Responses
of the three variables to one standard deviation innovations were on the average, found to be
dormant in the early stages of the out-of-sample forecast period but all demonstrated more
pronounced responses after about 7 years into the forecast period.