Unpacking the Productivity Paradox of FDI in Sub-Saharan Africa: Evidence from Nigerian Manufacturing Panel Data

This dissertation addresses the productivity paradox of foreign direct investment in Sub-Saharan Africa, whereby aggregate FDI inflows fail to generate predicted productivity convergence with global manufacturing benchmarks, using a comprehensive longitudinal panel dataset constructed from Nigerian manufacturing establishments. Existing studies of FDI productivity spillovers in Africa have produced inconclusive and contradictory results, largely due to data limitations, sample selection bias, and failure to account for the heterogeneous absorptive capacity of domestic firms. The study constructs a novel firm-level panel dataset by merging five rounds of the Nigerian Enterprise Survey, investment records from the Nigerian Investment Promotion Commission, and trade data from the Nigerian Customs Service, covering over 2,000 manufacturing establishments across 18 years from 2005 to 2023. Total factor productivity is estimated at the firm-year level using the control function approach of Ackerberg, Caves, and Frazer, and spillover effects are estimated through spatial econometric models that account for geographic proximity to FDI establishments and industry-level vertical linkage intensities. The theoretical framework synthesises the heterogeneous firms trade model, the absorptive capacity framework, and the geographic knowledge spillover theory. The dissertation extends the literature by introducing a productivity paradox decomposition framework that distinguishes between composition effects, within-firm productivity suppression, and market structure distortions as competing explanations for the paradox. Original contributions include the longitudinal dataset construction methodology, the spatial spillover estimation approach, and the paradox decomposition framework itself. Policy implications focus on restructuring FDI incentive design toward productivity linkage conditionality. Keywords: FDI spillovers, productivity paradox, manufacturing, Nigeria, panel econometrics