Abstract
This paper investigated the key determinants of FDI in the Nigerian telecommunication sector. The study made use of data from 1986 to 2014. Annual data on infrastructure, government expenditure, trade openness and market size, were sourced from the World Development Indicators (WDI) of the World Bank. FDI flow into telecommunication sector, foreign exchange rate, interest rate and inflation, were sourced from Central Bank of Nigeria Statistical Bulletin. Data were analyzed using graphs, t-test and Autoregressive Distributed Lag (ARDL). The results showed that the key determinants of FDI in the sector are market size and trade openness (t = 5.75 to 9.05; p < 0.05) on positive side, as well as Inflation and real interest rate (t = -0.05 to -4.03; p < 0.05) on negative side. The study therefore concludes that the key determinants of FDI flow into the Nigerian telecommunication sector are market size, trade openness, government expenditure, inflation and interest rate.
Highlights
Foreign Direct Investment (FDI) has emerged as the most important source of external resource flows to developing countries over the years and has become an integral part in the formation of capital in these countries
The results showed that the key determinants of FDI in the sector are market size and trade openness (t = 5.75 to 9.05; p < 0.05) on positive side, as well as Inflation and real interest rate (t = −0.05 to −4.03; p < 0.05) on negative side
The study concludes that the key determinants of FDI flow into the Nigerian telecommunication sector are market size, trade openness, government expenditure, inflation and interest rate
Summary
Foreign Direct Investment (FDI) has emerged as the most important source of external resource flows to developing countries over the years and has become an integral part in the formation of capital in these countries. Attempts have been made by Nigerian authorities to try to attract FDI via various reforms. The reforms included the deregulation of the economy, the new industrial policy of 1989, the establishment of the Nigeria Investment Promotion Commission (NIPC) in early 1990s, and the signing of Bilateral Investment Treaties (BITs) in the late 1990s. FDI can serve to integrate domestic markets into the global economic system far more effectively than could have been achieved only by traditional trade flows
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