Abstract
This study examines the roles infrastructure play in attracting foreign direct investment (FDI) into Nigeria for the period between 1981 and 2014. It also investigates the type of infrastructure that has more impact on FDI attraction. The unit root test results show that none of the variables in the study is integrated of order two, that is, I(2), a condition which justifies the use of Autoregressive Distribution Lag (ARDL) framework. The ARDL Bounds Test approach to cointegration was employed to determine the long-run relationship among the variables in our model and the result shows that there is a long-run relationship between infrastructure and FDI in Nigeria. The result of the estimation of the selected ARDL Error Correction Model shows that none of the infrastructure variables (tractor, telephone lines and electricity) employed in this study is significant to attract FDI into Nigeria in the short-run although electricity production (power supply) was found to influence FDI in the long-run. The study thus recommends that the power sector be revitalized and should be given priority as it will attract FDI, increase national output and move Nigeria closer to actualizing her dream of becoming one of the twenty leading economies in the world by the year 2020.
Highlights
Every country of the world, especially developing economies, strives to attract foreign direct investment (FDI) because it is a major source of external finance
Unit root test is not required in Autoregressive Distributed Lag (ARDL) framework, it is necessary to test for unit root to ensure that no variable in the model is found to be stationary after second difference, that is, I(2) because Autoregressive Distribution Lag (ARDL) procedure does not accommodate I(2) series
The result of the Phillip Perron (PP) approach shows that log of foreign direct investment and log of tractor per 100sq. km of arable land are stationary at level while log of electricity production and log of fixed telephone subscription are stationary at first difference
Summary
Every country of the world, especially developing economies, strives to attract foreign direct investment (FDI) because it is a major source of external finance. The result of the estimation of their translog specification shows that the quality of energy, communication and transport infrastructures have a highly significant positive impact on the volume of investment in the countries under study.
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