By: Daniel Chibueze Onyejiuwa, Elizabeth Mojirayo Olatubi, Gilbert Deinde Ifarajimi
Pages: 724–741, Volume: 3, Number: 1
Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 5/1/2026, 2026
ISSN (Electronic): 2536-6742
DOI:
Foreign Direct Investment, Trade Regimes, and the Manufacturing Wage-Productivity Nexus in Nigeria: Empirical Evidence of a Broken Transmission Mechanism
Abstract:
Foreign direct investment (FDI) is theoretically posited as a catalyst for industrial productivity and wage growth in emerging economies. However, the Nigerian manufacturing sector presents a confounding paradox, having witnessed persistent wage stagnation and a decoupling of labour rewards from productivity indices. The study employed an Autoregressive Distributed Lag (ARDL) bounds testing approach and its re-parameterized Error Correction Model (ECM) to analyse how trade openness and tariff structures condition the FDI-productivity relationship. Results reveal a significant long-run cointegrating relationship, yet the interaction between trade openness and FDI (FDI x TRO) exhibits a statistically significant negative coefficient (-0.344), implying that in the absence of robust domestic infrastructure, trade liberalization encourages import-oriented investment that “hollows out” domestic industrial value rather than fostering efficiency-seeking manufacturing. The study results revealed a severe structural break in 2024, where a 55% collapse in MVA coincided with a significant currency devaluation, further severing the link between nominal capital inflows and real labour welfare. The ECM coefficient (-0.624) indicates a moderate speed of adjustment, with 62.4% of equilibrium deviations corrected annually. The study recommends a strategic recalibration of trade policy and exchange rate stabilization.
Keywords: Foreign Direct Investment, Manufacturing Wages, Trade Openness, Nigeria, Transmission Mechanism
How to Cite
Onyejiuwa, D. C., Olatubi, E. M., & Ifarajimi, G. D. (2026). Foreign direct investment, trade regimes, and the manufacturing wage-productivity nexus in Nigeria: Empirical evidence of a broken transmission mechanism. AEFUNAI Journal of Economics, Finance and Development Studies (AEFUNAI-JEFDS), 3(1), 724–741.
Creative Commons Attribution 4.0 International License (CC BY 4.0)
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