Determinants of Foreign-Direct-Investment (FDI) in Nigeria

Due to the importance of foreign direct investment (FDI), scholars are always keen to explore FDI determinants and analysed their implications. Nevertheless scholars have proposed mixed viewpoints of FDI and interpreted its determinants differently, which do not contribute to the knowledge advancement and amalgamation of FDI literatures. The current research, therefore, aims to advance the knowledge of FDI determinants in Nigeria through a new investigation by critically reviewing past literature, both theoretical and empirical, on the key determinant factors affecting Nigeria’s inward FDI, collecting relevant data, formulating an adequate model specification and choosing the most suitable econometric technique to undertake the empirical analysis using a state-of-the-art cointegration technique (the ARLD bounds testing approach to cointegration) and interpreting and discussing the results, identifying the main findings, and drawing out key policy implications. Data are collected from the UNCTAD (1970-2014) and analysed by auto-regressive distrusted lag tests (ARDL). The analysis of FDI determinants in the Nigerian economy yielded reliable, robust and economically meaningful results thereby offering an insight into the driving factors of inward FDI. Findings indicate that the interest rate, external debt, oil rents, and GDP growth are all important determinants, possessing a long-run effect on FDI. Different from the literature, however, trade and exchange rate volatility are barely important to FDI. Research findings not only have brought valuable insights to the FDI literatures, but also guided the organisations and managers in FDI management.