Abstract
The positive effect of globalization has continued to impact FDI inflow to developing countries during the last decade except for the rising influence of political risk in host locations. Mixed outcomes have trailed the findings related to the studies on FDI and political risk relationship and in particular on African countries like Nigeria.This paper investigated the effect of political risk on FDI inflow to Nigeria using secondary data from 2000 to 2014 using simple linear regression. The study combined from select variables, the institutional factors with location determinants peculiar to Nigeria’s risk environment. It is found that political risk holds a positive and significant association with FDI to Nigeria but not close enough to inhibit the inflow of foreign investment to the country.However, the findings provide a strong basis for policy shift in relation to security, country promotion and rebranding as well strengthening of institutions.
Highlights
The recent development in the increase in foreign direct investment (FDI) flow to developing countries is a major sign of globalization mainly driven by the efforts made in liberalizing many economies creating a near absence of trade barriers
The world FDI performances in the last decade has been encouraging which shows how vital its role in global economic contribution is, for example a decline was witnessed in 2014 FDI flow compared to 2013, it accounted for 40% of the world total external development finance targeting developed and transition economies according to the World Investment Report (UNCTAD, 2015), making it a primary source of capital
4.1.2 The effect of Religious Tension (RelT) is positive at 1% significant level indicating that our finding is consistent with the previous work of (Busse & Hefecker, 2005) thereby lending support to (Dolansky & Alon, 2008) especially when viewed in the context of wider diversity of the country and the size of the country’s economy
Summary
The recent development in the increase in foreign direct investment (FDI) flow to developing countries is a major sign of globalization mainly driven by the efforts made in liberalizing many economies creating a near absence of trade barriers. This feat is commonly associated with investors’ concern on what may befall such investments in the target locations. The world FDI performances in the last decade has been encouraging which shows how vital its role in global economic contribution is, for example a decline was witnessed in 2014 FDI flow compared to 2013, it accounted for 40% of the world total external development finance targeting developed and transition economies according to the World Investment Report (UNCTAD, 2015), making it a primary source of capital. This report shows a 16% fall from the preceding year arising from the country’s effort towards diversification into non-oil sectors (UNCTAD, 2015) which has remain in the foremost of recommendations by scholars (Kareem et al, 2012)
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