Foreign Direct Investment In Nigeria Research Articles

Political Turbulence and its Impact on Foreign Direct Investment Inflows in some selected African countries

This work examined the political turbulence and its impact on Foreign Direct Investment inflow on some selected African countries; Nigeria, Ghana, Kenya and South Africa. The aim is to determine how the political climate in Nigeria, Ghana, Kenya and South Africa affects the inflow of foreign direct investment. The modified Cobb Douglass model was the theoretical underpinning of the study since growth in FDI is likened to output and the factors that lead to growth are the investment climate variables. Using the panel ARDL model analysis, the following findings were made: Political investment climate variable (PSI) had significant positive effect on the inflow of foreign direct investment in Nigeria, Ghana, Kenya and South Africa. The result showed that Political investment climate variables (political stability and corruption index) exerted significant negative effects on the inflow of foreign direct investment into Nigeria, Ghana, Kenya and South Africa. It was recommended that; Efforts should be made by the governments of Nigeria, Ghana, Kenya and South Africa to enhance their economic fortunes by strengthening their economy through prioritizing political stability and addressing underlying causes of political unrest, corruption, weak institution and political social inequality. As well as engaging in massive production for exports which will boost economic growth and attract more foreign direct investment.

Effect of Exchange Rate on Foreign Direct Investment in Nigeria

This study investigates the relationship between exchange rates and Foreign Direct Investment (FDI) in Nigeria from 1981 to 2021. Employing a Fully Modified Ordinary Least Squares (FMOLS) regression analysis, the study reveals a significant positive correlation between exchange rates and FDI. Conversely, the study finds a positive but statistically insignificant association between trade openness and FDI. Finding on interest rates (INTR coefficient: -0.104) indicates a negative relationship with FDI, lacking statistical significance. Similarly, inflation rates (INFR coefficient: 0.012) exhibit a positive yet statistically insignificant link with FDI. Notably, the study highlights a substantial and statistically significant negative relationship between human capital (HC coefficient: -77.787) and FDI, signifying the importance of human capital development in attracting foreign investment. In summary, the research findings indicate a substantial impact of exchange rates on FDI in Nigeria. It suggests that policymakers should proceed with caution to avert possible depreciation of the exchange rate, which could deter foreign investors. Furthermore, adopting a comprehensive strategy for macroeconomic stability could foster a more conducive atmosphere for foreign investment.

Time Series Modelling and Forecasting Foreign Direct Investment using Linear and Nonlinear Models: The Case of Nigeria

This study addresses the crucial need for accurate forecasting of Foreign Direct Investment (FDIT) trends in Nigeria. FDIT plays a pivotal role in the country's economic growth and development efforts, driving industrialization, infrastructure enhancement, and job creation. However, predicting FDIT accurately is essential for policymakers, investors, and researchers to formulate effective strategies and decisions. This study conducts a comparative analysis of four FDIT forecasting models: Simple Exponential Smoothing (SES), Holt Exponential Smoothing (HES), ARIMA, and NNAR in Nigeria, utilizing R version 4.3.2 and forecast and nnetar packages for implementation. The FDIT dataset is partitioned into 80:20 training-test samples, with models applied to each subset for performance evaluation. Leveraging historical FDIT data, the study evaluates the predictive performance of each model over a specified period, employing error measures such as RMSE, MAE, MASE and MAPE to assess accuracy and reliability. Additionally, residual normality tests and visual inspections validate model assumptions. Results indicate varying levels of accuracy and predictive capability among the models, with HES and NNAR models displaying superior performance compared to SES and ARIMA, evidenced by measure error rates. Residual normality tests affirm the suitability of the models for FDIT forecasting. The study contributes empirical evidence to the existing literature, providing valuable insights into forecasting techniques for FDIT in Nigeria. These insights can guide policymakers, investors, and researchers in selecting appropriate models for forecasting FDIT trends and making informed decisions. Future research avenues could explore advanced modelling techniques and additional variables to further enhance the accuracy and reliability of FDIT forecasts within the Nigerian context.

Examining the Impact of Country Risks on Chinese FDI in Nigeria

This study investigates the relationship between economic risk, political risk, and Chinese foreign direct investment (FDI) in Nigeria. Using correlation analysis, the study initially identifies a weak positive correlation between economic risk and Chinese FDI, and a weak negative correlation between political risk and Chinese FDI. However, due to the weak nature of these correlations, they are deemed insufficient for decision-making purposes. To determine potential causality, a causality test and regression analysis with optimal lag variables were conducted. The results indicate a positive but statistically insignificant relationship between economic risk and Chinese FDI, and a negative but statistically insignificant relationship between political risk and Chinese FDI. These findings suggest that Chinese FDI in Nigeria is not significantly influenced by economic or political risks, aligning with theories that Chinese investments are driven by strategic objectives such as resource acquisition and geopolitical influence. The study did not find any causal relationship between the political risks and economic risk in Nigeria either. The study contributes to FDI literature by challenging conventional determinants of FDI and provides practical implications for policymakers and businesses in aligning strategies with Chinese investment motivations. Future research should explore additional factors influencing Chinese FDI to offer a more comprehensive understanding of these dynamics.

The Influence of Exchange Rate Fluctuation on Foreign Direct In-vestment in Nigeria (1986-2022)

Using yearly data series spanning 36 years, from 1986 to 2021, the research empirically evaluates the influence of exchange rate fluctuation on foreign direct investment in Nigeria. The study’s objectives were focus on examining the extent of exchange rate volatility in Nigeria and ways by which exchange rate volatility impact on foreign direct investment in Nigeria. Secondary source of data was employed from world development indicator (WDI) and central bank of Nigeria (CBN). Autoregressive Distributed Lag (ARDL) were employed and the GARCH (1, 1) model was used in investigating the model built and were analyzed using multicollinearity with the use of Augmented Dickey-Fuller (ADF) test to verify that the variables are stationary in order to make sure the estimated results are not erroneous. Findings from the study shows that real exchange rate volatility (REERVOL) has a long-term and short-term detrimental impact on FDI and negative long- and short-term interest rate coefficients demonstrate that an unfavorable interest rate exacerbates the already diminishing foreign direct investment (FDI) flows to Nigeria as a result of REERVOL. The policy was recommended for improving FDI through effective exchange rate management.

Foreign Direct Investment, Energy Consumption and Greenhouse Gas Emissions in Nigeria

This paper investigated the nature of the relationship that exists between foreign direct investment, energy consumption, and greenhouse gas emissions in Nigeria between 1990 and 2020. The investigation was done using the ARDL method of analysis. The bounds cointegration test found the existence of long run relationship among the variables. The long run estimation result showed that foreign direct investment in Nigeria has a negatively significant impact on greenhouse gas emission in the short run and long run. The result also shows that AGO consumption has a negatively insignificant impact on greenhouse gas emission in the short run and long run. While PMS consumption has a positively significant impact on greenhouse gas emission in the long run. The model goes on to propose the use of government policies that would promote FDI investment in Nigeria and a more business friendly environment

Strategic impact of knowledge entrepreneurship on foreign direct investment in Nigeria

The study investigated the strategic impact of knowledge entrepreneurship on Foreign Direct investment in Nigeria. This study examined the rate of foreign Direct Investment (FDI) in Nigeria because the country has witnessed massive downward sliding of foreign direct investment in recent times. To solve this problem, this study is aimed at ascertaining the nature of impact Knowledge entrepreneurship has on foreign direct investment. The study also investigated the cause of the massive downward sliding of foreign direct investment in Nigeria. This study adopted the survey design. Simple random sampling technique was used in selecting the 200 staff of selected foreign direct investment firms in Nigeria. Findings revealed that there is a positive and significant relationship between knowledge entrepreneurship and Foreign Direct investment in Nigeria. This means that the knowledge of Foreign Direct Investment opportunity in another country will accelerate the action of the entrepreneur in taking advantage of the opportunity to make profit in that country. This is in tandem with Knowledge Spillover Theory of Entrepreneurship. Knowledge entrepreneurship has the potency to attract foreign direct investment hence the positive and significant correlation. The study also found that knowledge entrepreneurship has resulted in technological transfer to Nigeria and employment generation as well as increased profitability and market share of the FDI operating in Nigeria.The study concludes that knowledge entrepreneurship is a viable business model in Nigeria and that the reason for the massive and downward sliding of Foreign Direct Investment in Nigeria currently is as a result of the national challenges of high insecurity and exchange rate volatility.

Assessing the Gains and Challenges of Nigeria’s Participation in The Forum On China-Africa Cooperation(FOCAC)

The paper examined the benefit that Nigeria has gotten following her participation in the Forum on China-Africa Cooperation(FOCAC) which was established in the year 2000 in Beijing, China. FOCAC is seen as an example of the South-South Co-operation attempt to realise the dreams of the Guandung Conference held in Indonesia in 1955. The paper relied on secondary data which were sourced from textbooks, journal papers, and seminar papers among others that are related to the subject matter and adopted complex interdependence theory as a framework of analysis. Findings from this work show that Nigeria's participation in the forum has greatly enhanced trade and increased Foreign Direct Investment (FDI) as available data shows that FDI in Nigeria has increased exponentially heating 19.27 billion US dollars in the year 2019 against 1,900 times that of 1971 when the diplomatic ties were established. FOCAC has also helped in developing Nigeria's infrastructure like the construction of the Abuja- Kaduna railway line, among other benefits. However, findings also revealed that there are challenges in this relation, typical among them are the fear expressed by so many Nigerians of the likely hood of Nigeria falling into the Chinese debt trap, unbalanced trade which favors China, and security challenges confronting Nigeria like kidnapping, banditry, and terrorism among others. Based on this, the work recommends that China should use the platform of FOCAC to allay this fear of the debt trap and assist Nigeria in confronting these securities challenges. On the part of Nigeria, the paper recommends that Nigeria need to increase her export trade among other measures, as this will help her build a strong economy and have the resources to supply China's growing need, rather than demand for energy resources and other raw materials.

Impact of Macroeconomic Determinants on Foreign Portfolio Investment in Nigeria

Foreign capital inflows, including foreign portfolio investments (FPI), significantly contribute to filling Nigeria's domestic saving gap and are important sources of capital formation, technological development, innovative capacity, skills building, and organizational improvements. However, exchange rate fluctuations have controversially impacted FPI flows. Some studies found exchange rate changes increased Nigerian FPI, while others determined a negative relationship. This study examined macroeconomic determinants of FPI in Nigeria from 2011-2022 using quarterly data. Applying OLS modeling after confirming variables were integrated at levels and first differences, results showed exchange rates, inflation, and GDP significantly influenced FPI flows. Specification tests validated model stability. Analysis revealed exchange rate fluctuations substantially drove capital inflow and divestment decisions. Suggesting exchange rate uncertainty discourages long-term FPI, findings imply the need for fiscal policies supporting security and business environment certainty to attract foreign investors. Additionally, raising benchmark interest rates above inflation could ensure positive real returns and promote investments. Overall, creating macroeconomic stability through coordinated fiscal, monetary, and exchange rate policies appears critical for Nigeria to reap the development benefits of sustained foreign portfolio inflows. It therefore, suggested that, Fiscal Authority should create an enabling environment, especially by providing adequate security in the country in order to attract and retain foreign investors in Nigeria. Also, the monetary authority should increase the interest rate (MPR) which is the anchor rate in order to have positive rate of return after considering the rate of inflation in the country. In conclusion, the study recommended for further study especially on foreign direct investment in Nigeria.

Impact of Exchange Rate Shock on Foreign Direct Investment in Nigeria.

This study examines the underlying forces of foreign direct investment (FDI) response to the exchange rate shock in Nigeria, covering the period 1981 to 2021. Including long-run analysis, this study employs the VEC model innovation accounting as an econometric analysis technique. The outcomes reveal that in the long run, exchange rate appreciation, a thriving domestic investment environment, and economic size positively drive foreign inflows. Conversely, rising economic instability, particularly associated with increasing price levels, negatively impacts foreign investment. The Innovation accounting analysis indicates that FDI positively responds to shocks in exchange rates, GDP, and capital. However, the strength of these responses diminishes over time. The relationship with consumer price index (CPI) shocks appears more complex, with varying reactions over the specified horizon. Hence, policymakers are urged to prioritize exchange rate stability, promote economic growth and innovation, and enhance the domestic investment environment. Addressing economic instability and inflation is crucial, necessitating robust policies to maintain economic stability. Continuous monitoring of CPI is advised, and long-term policy planning is recommended to ensure sustained positive impacts on FDI. Additionally, international collaboration is encouraged to foster a stable global investment environment.

The Determinants of Foreign Direct Investment in Nigeria: An Empirical Study

The objective of this study is to detect which elements act as a key driver of high FDI inflows in Nigeria. It is predictable to help foreign investors to get better understanding in the nature of FDI and support the investment decision. In lieu of the above, extensive hypothesis were developed to identify a suitable model of foreign direct investment for Nigeria. After the hypothesis, data were then collected from various official data base for Nigeria to conduct the empirical research. However, the study foresees the gathering of reliable and consistent secondary information for the retro 1980-2022 from World Development Indicators (WDI) record on the World Bank. Data were composed on variables that were supposed to have the potential in persuading foreign direct investment in Nigeria which was based mainly on the features of the economy. The data collected were analyzed via various econometric techniques. Findings from the study show that the size of the Nigerian market and the level of their economy openness are major determinants of FDI inflows. The result further suggests that high inflation rate is a hindrance to FDI. Several policy recommendations were made as the research will be a practical mean, not only for academic purpose. Its discoveries, if applied will cause for sure a real improvement in the investment climate of Nigeria.

The Drivers of Foreign Direct Investment in Nigeria

The study seeks to explore and present the macroeconomic factors that drive Foreign Direct Investments (FDI) in Nigera. It employed least square methods with model diagnostic tests and Granger causality processes on 1986–2020 Nigerian yearly data. The results show that interest rate, currency rate, and level of economic activity (represented by growth in real GDP) influence the flow of FDI into Nigeria. FDI is neither driven by inflation nor by market openness. The policy implications are that when considering policies aimed at attracting foreign direct investors to Nigeria, government and monetary authorities should give priority to such factors as interest rates, exchange rates, and the growth rate of the economy. It is suggested that reduced loan rates and slight Naira depreciation should be encouraged and promoted.

Effect of Stock Market Valuations on Foreign Direct Investment in Nigeria

This study examines the impact of stock market valuations on foreign direct investment in the Nigerian economy. This was aimed at ascertaining how the development of the Nigerian Stock Exchange has stimulate the inflow of foreign direct investment to Nigerian businesses. Historical data was collated and estimated employing the Ordinary Least Squares (OLS) technique. The empirical results indicate that market capitalization and value of deals in the exchange exert a positive impact on foreign direct investment inflows to Nigeria. Although, further observations indicate that only stock market capitalization exert a statistically significant impact on foreign direct investment inflows to Nigeria. Furthermore, it emerged that all share index is negative and has a statistically valid impact on foreign direct investment inflows in Nigeria. On the basis of the findings of this study, the following recommendations are made: Government should consider the maintenance of prudent macroeconomic policies and also continue to create conducive environment to stimulate the flow of foreign direct investment; Also, there is need to increase citizens’ knowledge and awareness about participation in the stock market through conscious sensitization and education from schools to offices and places of worship.

Financial Development: An Empirical Study of Foreign Direct Investment in Nigeria (1999-2021)

This study determined the effect of financial development on foreign direct investment in Nigeria. The study adopted Ex Post Facto research design. Data were obtained from Central Bank of Nigerian Statistical Bulletin from 1999 to 2021. The hypotheses were tested with regression analysis, and the result shows that credit to private sector and market capitalization were positively affected by foreign direct investment, though the effects were not statistically significant. Based on the findings, government should create enabling environment that will encourage foreign direct investment in the industrial production sector which will help to increase the nation gross domestic product

National Security and Foreign Direct Investment in Nigeria (2005 -2022)

In the last decade, there has been an increase in national insecurity in the country, which has resulted in many people being killed, kidnapped, and misplaced. Despite different measures put in place by the government, national security has not been well noticed in Nigeria. As a result, this study empirically examined the effect of national security on inflows of foreign direct investment in Nigeria, covering the period 2005–2021. The study measured foreign direct investment using the net inflow of foreign direct investment, while measuring national security by the budgets of external defence and internal security. Control variables are gross domestic product and trade openness. Secondary data were sourced from the CBN Statistical Bulletin and estimated using an auto-regressive distributed model. The study found that both government expenditure for external defence and internal defence had positive effects on foreign direct investment, while only government expenditure for external defence was found to significantly impact foreign direct investment in the long run at a 5% level of significance. This implies that continuous expenditure by the government to combat national insecurity would ensure a serene environment, which would assure the citizenry's desire for national security. The study concluded that national security has a significant effect on foreign direct investment in Nigeria. The study recommends that the government ensure that the expenditure on both external and internal defence is well utilised and directed to the necessary quarters to reduce insecurity, which would increase the influx of foreign direct investors in the country. Furthermore, the government should also ensure that the armed forces and paramilitary squads are well motivated to increase their morale to fight insecurity so as to ensure national security and peace of mind for all the people within the country.

Effects of inflation on foreign direct investment in Nigeria

Inflation's effects on the volume of foreign direct investment (FDI) in Nigeria from 1995 to 2020 are examined in this study. In order to establish the relationship between the dependent variable (foreign direct investment) and the independent variables (inflation, real interest rate, and exchange rate), secondary data were gathered from the CBN Statistical Bulletin, Nigeria Bureau of Statistics and the World Bank Database. Johansen cointegration test was used to ascertain the long-term relationship between FDI and the independent variables, while the enhanced Dicker-Fuller test (ADF) was used to examine the data's time series property. It was decided to use the Vector Error Correction Model (VECM), and the error coefficient, which is correctly signed and significant, shows that the independent variables and FDI have a long-term relationship. The model's explanatory variables' effects on FDI were statistically insignificant. But as indicated by the probability of the F-statistic at the 5% level of significance, the overall regression was significant. The study suggests that efforts be made to use additional macroeconomic policies as a way to boost foreign direct investment in the economy and that the government and monetary authorities should not solely rely on the tool and model for controlling inflation.

The Impact of Foreign Direct Investment and Oil Revenue on Economic Growth in Nigeria

Abstract Many emerging economies, particularly oil-rich countries such as Nigeria, have neglected the key drivers of growth, and consequently resulting in a decline in investment and employment. In the midst of this, the current study sought to examine the extent to which foreign direct investment and oil revenue impact Nigerian economic growth. The estimation was done using ordinary least squares (OLS) techniques, and the Granger causality test was used to determine the direction of causality between FDI, oil revenue, and economic growth using annual time series data from 1991 to 2019. Hence, recognising that annual time series are high-frequency data, all the variables were subjected to OLS assumptions. The empirical findings revealed that FDI and oil revenue significantly impacted growth. Accounting for the impact of economic activities reflected in the role of financial inflow and outflow on economic growth, a significant and positive relationship was found. This implies that international monetary transactions between entities captured in the current account balance are key determinants of growth in Nigeria. Further evidence revealed that variables such as real exchange rate, inflation and interest rates significantly determine economic growth in Nigeria. As such, this finding was further supported by their interactive effects, revealing an inverse and significant influence on economic growth. The Granger causality results show bidirectional causality between oil revenue and growth, as well as between oil revenue and foreign direct investment in Nigeria. The robustness test, which employs GDP per capita and GDP growth as proxies for economic growth, is consistent with empirical evidence. As a result, FDI and oil revenues are important drivers of Nigeria's growth, ceteris paribus.

Governance Perception Study of the Chinese Foreign Direct Investment Activities in Nigeria

This study explores the governance perceptions of stakeholders regarding Chinese Foreign Direct Investment (FDI) activities in Nigeria. The aim is to gain insights into stakeholders' perspectives on various governance dimensions, including transparency and accountability, efficiency and effectiveness, participation and inclusiveness, the rule of law and legal frameworks, social and environmental impact, and stakeholder engagement. Thematic qualitative analysis is applied to the collected data to identify emerging themes and patterns in stakeholders' perceptions of Chinese FDI activities. By analyzing stakeholders' perspectives, this research provides valuable insights into the governance challenges and opportunities related to Chinese FDI in Nigeria. The findings include valuable insights into stakeholders' viewpoints, allowing for a comprehensive understanding of governance dynamics and areas of improvement in Chinese FDI activities in Nigeria. The findings enhance governance frameworks and promote sustainable and mutually beneficial relationships between China and Nigeria. The study contributes to the existing literature on governance perception and provides practical implications for enhancing governance practices and stakeholder engagement in Chinese FDI projects.

Government Fiscal Policy and Foreign Direct Investment in Nigeria: An Application of VAR Model

Purpose: The aim of this paper is to examine the impact of key fiscal policy variables (government capital expenditure, government revenue, government recurrent expenditure, external debt and tax revenue) on foreign direct investment and to check if there exists a causal relationship between fiscal policy and Foreign direct investment in Nigeria. Approach/Methodology/Design: Times series Econometrics methods such as Vector Autoregressive (VAR) Model, unit root test, cointegration test, Lag selection test and Granger causality test on annual data obtained from CBN statistical bulletin and National Bureau of Statistics spanning 1985 to 2020 were used. Findings: The results of the unit root test showed that FDI, government capital expenditure, government revenue and tax were stationary at order one (1), while recurrent expenditure and external debt were stationary at order zero (0). Also there exists co-integration among all the variables in the model. The findings showed that fiscal policy has insignificant impact on foreign direct investment in Nigeria. Originality/value: The results of this paper give valuable information on the relationship that fiscal policy may have with foreign direct investment and a need for a well-articulated and coordinated fiscal policy to attract FDI in Nigeria for optimum growth and development.

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

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.