Effects of Macroeconomic Variables on Foreign Direct Investment in a Liberalized Economy: The Case of Nigeria

Abstract

The study investigated the impact of some selected macroeconomic variables on the attraction of foreign direct investment (FDI) in Nigeria between 1975 and 2009. Augmented Dickey-Fuller test was used to examine the time series property of the data and Johansen co-integration test was employed to ascertain the long-run relationship between the dependent variable (FDI) and the independent macroeconomic variables. Ordinary least technique also was employed in the study. Error correction coefficient was high, rightly signed and significant which reveals a long run relationship between the selected macroeconomic variables and FDI for the period of study. The explanatory variables included in the model showed statistical significant impact on FDI. The overall regression was significant as denoted by the probability of the F-statistic at 5% significant level. On this note, among the recommendations made include: the Nigerian government should promote non-oil exports and discourage over dependence on imports of goods and raw materials; diversification of the economy should be paramount in the minds of the resource managers of our economy and it is imperative that the country has to promote private sector led growth and the creation of enabling environment, especially infrastructure.