Abstract
This research investigates the effect of the price of crude oil on foreign direct investment inflows to a country like Nigeria that produces the oil. We used secondary data on oil price and foreign direct investment inflows generated over a period of ten years from January 2010 to December 2019. The price per barrel of the Brent crude oil – Nigeria’s equivalent – is the independent variable, while quarterly aggregate foreign direct investment inflows to Nigeria is the dependent variable. We used the IBM Statistical Package for the Social Sciences (SPSS) to perform Simple Regression, Pearson, Kendall, Spearman’s Correlation Coefficient, and Durbin Watson analyses of the independent and dependent variables. The output of the analysis revealed that there is a significant positive relationship between crude oil price and FDI inflows to Nigeria. A one dollar increase in the price of crude will cause a corresponding increase of $36.8m in FDI inflow. We therefore inferred that investors are optimistic when the price of the commodity goes upward. Our recommendation is that governments of oil producing countries should take seriously anything that will bring about an increase in the price of crude oil. Since we used the aggregate quarterly FDI data in this research, there is need for researchers to isolate and use the FDI inflows that are targeted at the oil and gas industry to assess the extent of relationship in their future work. Keywords: crude oil price, foreign direct investment, fluctuation of markets, investors sentiments, the oil industry. DOI: 10.7176/EJBM/12-17-09 Publication date: June 30th 2020
Highlights
Several studies have been carried out on different aspects of the crude oil market and investor sentiment
1.2 Statement of The Problem While we understand the effects of volatility of stock prices, their returns, and profits on investors sentiments, we need to explore avenues through which we can explain the role crude oil prices play in influencing the flow of foreign direct investment (FDI) to a nation
3.0 Methodology In this research we obtained secondary data on oil price and FDI inflows spanning a period of ten years from January 2010 to December 2019 from the Central Bank of Nigeria (CBN), Census and Economic Information Centre (CEICdata) and Organization of Petroleum Exporting Countries (OPEC)
Summary
Several studies have been carried out on different aspects of the crude oil market and investor sentiment. 1.2 Statement of The Problem While we understand the effects of volatility of stock prices, their returns, and profits on investors sentiments, we need to explore avenues through which we can explain the role crude oil prices play in influencing the flow of FDI to a nation. This is especially important in the case of Nigeria where crude oil plays a dominant role in its economy. A clear understanding of the influence of the price of crude oil on FDI flows into the country will enable the authorities to weigh the impact of their decisions aimed at influencing oil price in one direction or another
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