DOES FOREIGN DIRECT INVESTMENT REDUCE INCOME INEQUALITY? EMPIRICAL EVIDENCE FROM NIGERIA

Abstract

Whether FDI reduces income inequality has remained a debate in empirical literature. Following the Sustainable Development Goals (SDGs) 10, this paper investigates the nexus between FDI and income inequality in Nigeria, employing time series data from 1980 to 2022 and the autoregressive distributed lag (ARDL) technique. The study established a cointegrating relationship between the research variables. It also found a positive and significant relationship between FDI and income inequality in the short and long run. That is, income disparity worsens as FDI inflows to Nigeria rise. While education contributed to lowering income inequality in the long run, growth exacerbated it in the short run. Therefore, this study advocated fine-tuning government policy to attract quality FDI, which is job enhancing to Nigeria. Likewise, policymakers should pay more attention to providing quality education to boost the human capital levels in the country.