Abstract: There is a great debate on the impact of foreign direct investment (FDI) on unemployment. Some scholars are of the view that FDI increases unemployment in the host economy, while others argue that FDI is key to reducing the unemployment rate. This paper therefore empirically investigated the FDI-unemployment nexus in Nigeria for the period 1981 to 2016. Data was sourced from the Central Bank of Nigeria Statistical Bulletin (2016) and the World Bank database. The study employed the Johansen cointegration test and the Error Correction Model to establish that FDI has an inverse relationship with the unemployment rate in Nigeria, making FDI a necessary tool for tackling the unemployment challenge of the country. Findings also revealed that there is a long-run relationship between the variables in the model, and the model has a speed of adjustment of about 46%. Therefore, it is recommended, amongst other things, that FDI should be directed to sectors such as Agriculture and Manufacturing that are able to employ a major percentage of the unemployed in the economy.

JEL classification: F21, F43, C23, O47
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