Impact of Terrorism on Foreign Direct Investment in Nigeria

Abstract

The relationship between terrorism and foreign direct investment (FDI) has stimulated research curiosity given its effects on lives lost, injuries, property damaged, and the psychological aftereffects, which to a very large extent impact economic growth and development. The realization of the magnitude of its influence on bilateral economic ties engineered the study, which examined the impact of terrorism on FDI in Nigeria. The data for this study were sourced from Global Terrorism Index (GTI), Stockholm International Peace Research Institute (SIPRI) database, International Country Risk Guide (ICRG)’s Quality of Governance (QoG) database, Central Bank of Nigeria (CBN) Bulletin, and World Bank Development Indicators (WDI) using autoregressive distributive lag (ARDL) bounds testing approach as described by Pesaran et al. (2001). From the results obtained, military expenditure, episode(s) of ethnic violence, and terrorist attacks have all been noted to have negative and significant impacts on FDI in Nigeria. The implication is that the reduction in FDI observed in the data is attributed to terrorism. Therefore, governments should overhaul the security apparatus so as to quell the menace of terrorists. This will go a long way to create a conducive environment for FDI to thrive, which will create more jobs for the growth and development of the Nigerian economy.