Impact of Ease of Doing Business on Foreign Direct Investment in Nigeria

Abstract

The principal purpose of this study was to unravel the effect of ease of doing business on foreign direct investment in Nigerian from 1980 to 2020. To achieve these goals, detailed analysis of ease of doing business on foreign direct investment was carried out. The ARDL and Bounds Testing Approach were used to investigate the long run and short-run relationship between the variables. The result shows that ease of doing business in terms of access to electricity is a significant predictor of foreign direct investment up to the second period lag in the short run and in the long run as well. This implies that more investment is needed in power sector to further enhance energy generation and distribution in the country All other variables, however, seem not to be statistically significant in the long run. Furthermore, we found out that the variables are statistically significant in the short run with the exception of the initial and first period lag of gross domestic product, and the second period lag of access to electricity. The study recommended among others that there should be optimal control of trade through the borders of the economy. In this way, all cross-border economic activities are accounted for. Governments should be intentional about achieving better ease of doing business score and make targeted and reformed policies to this end. One of these ways is by reducing and simplifying procedures involved in registration, setting up a business, tax, licenses, and other matters that borders around businesses.