An Empirical Analysis of Chinese Foreign Direct Investment and Manufacturing Employment in Nigeria’s South West Zone

Chinese foreign direct investment in Nigeria's manufacturing sector has generated extensive policy debate but limited rigorous empirical analysis of its employment effects at the regional level. This study conducts an empirical analysis of the relationship between Chinese FDI inflows and manufacturing employment outcomes in Nigeria's South West geopolitical zone, using panel data from 2010 to 2023. Secondary data were sourced from the National Bureau of Statistics, the Central Bank of Nigeria, and the Nigerian Investment Promotion Commission, covering Chinese FDI flows, employment levels, and wage rates in the manufacturing sector across Lagos, Ogun, Oyo, Osun, Ondo, and Ekiti States. The study employs fixed-effects panel regression, Granger causality tests, and an instrumental variable approach to address potential endogeneity between FDI and employment. Results indicate that Chinese FDI has a statistically significant positive effect on manufacturing employment in the short run, with each one-billion-dollar inflow associated with approximately 12,000 direct jobs. However, the employment elasticity is lower than that of non-Chinese FDI, reflecting Chinese investors' higher reliance on automated production methods and expatriate labour. Wage growth effects are minimal in the short run. The study fills an important empirical gap in the China-Nigeria FDI-employment literature, providing zone-specific evidence that complicates aggregate national analyses. Policy recommendations include local content employment benchmarks for Chinese investors and incentive structures that reward employment intensity in FDI projects.

Keywords: Chinese FDI, manufacturing employment, South West Nigeria, panel data, empirical analysis