Foreign Direct Investment In Nigeria Research Articles

Exchange Rate Volatility, Stock Market Performance and Foreign Direct Investment in Nigeria

This study investigated the impact of exchange rate volatility and stock market performance on the inflow of foreign direct investment to Nigeria using time series data from 1980 to 2013. It employed the ordinary least square technique and error correction mechanism in its estimations. The result revealed that exchange rate volatility has negative and significant effect on the inflow of foreign direct investment to Nigeria both in the long run and in the short run. It further revealed that market capitalization, proxy for stock market performance was positively signed and statistically significant. Apparently, a stable and well developed capital market will definitely attract direct foreign investment to Nigeria. The study recommends the pursuance of sound exchange rate management system and policies that will lead to increase in domestic production of export commodities. The study further recommends deepening of the capital market to provide the needed funds for investment and avoidance of dollarization of the economy to reduce the stress on foreign exchange earnings. Sound foreign reserve management practices are imperative for Nigeria as measures of maintaining the value of the naira and reduce the impact of international capital shocks.

Foreign Direct Investment and the growth of the Nigerian Economy

Foreign Direct Investment and the growth of the Nigerian Economy Aminu Umaru, El-Maude Jibreel Gambo, Hamza A. Pate Abstract This paper investigates the relationship between economic growth (GDP), foreign direct investment (FDI), foreign exchange rate (EXR) and openness (OPN) in Nigeria from 1981 to 2013. The paper employed Augmented Dickey-Fuller and Phillip-Perron technique in testing the unit root property of the series, Granger causality test of causation between the variables, Engel-Granger ECM technique in testing the long run adjustment speed of the model, Breusch-Pagan-Godfrey test of heteroskedasticity, Breusch-Godfrey serial correlation test, Ramsey RESET test of mis-specification, Chow Breakpoint test, after which Jarge-Bera test of normality. The results of the OLS revealed that foreign direct investment (FDI), foreign exchange rate (EXR) and openness (OPN) impacted positively on economic growth (GDP) in the Nigeria. The results of unit root suggest that all the variables in the model are stationary at first difference d(1). The results of Causality suggested that one-way causation existed between economic growth (INGDP) and foreign direct investment (INFDI) but the causation runs from economic growth (INGDP) to foreign direct investment (INFDI) implying that GDP can cause FDI but not the other way round. One-way causation also existed between economic growth (INGDP) and openness (OPN) but the causation runs from openness (OPN) to economic growth (INGDP) implying also that OPN can cause GDP but not the other way round. The result further indicated that no causation existed between exchange rates (EXR) and economic growth (INGDP), openness (OPN) as well as foreign direct investment (INFDI), no causation existed between openness (OPN) and foreign direct investment (INFDI). The ECM result revealed the existence of long run relationship between economic growth (INGDP), foreign direct investment (FDI), foreign exchange rate (EXR) and openness (OPN). The speed of adjustment was found to be at least three years for the long run equilibrium. This paper found that, there is no serial correlation among the error values, no misspecification of the model, and also that the variables of the are not stable throughout the period of the study and the break was found to be 1999 when the current democratic dispensation started. The result further revealed that the residuals of the model are normally distributed which make it possible for the results of this paper be used for policy purposes. In conclusion, this paper found a positive and significant relationship between economic growth and foreign direct investment in Nigeria. Therefore, this paper recommends that concerted effort be made by policy makers and relevant authorities to formulate policies aim at creating a conducive investment environment so that Nigeria can be better destination for foreign investment Policy makers should also take step to ensuring foreign exchange stability and increase openness of the economy so as to achieve meaningful economic growth. Full Text: PDF DOI: 10.15640/jeds.v3n1a10

Insecurity and Foreign Direct Investment in Nigeria

Nigeria has joined the league of countries that spend a higher proportion of their budgetary allocation on security. Thus, this paper empirically investigates the impact of insecurity on foreign direct investment (FDI) covering the period of 2003 to 2012. The study employed Least Square technique (OLS) to analyze the secondary data collected from Central Bank of Nigeria Statistical bulletin of various issues. Vote on security and defense (VSD) was used as a proxy for insecurity. The paper reveals a negative relationship between Foreign Direct Investment (FDI) and insecurity. The paper recommends that strong policy stance must be taken to address the state of insecurity in Nigeria so as to attract more foreign direct investment essential for economic growth and development.

Foreign Direct Invesstment in Nigeria; Overcoming Legal and Regulatory Challenges to Foreign Direct Investments in Nigeria: Is the Nigerian Government Doing Enough?

Foreign Direct Invesstment in Nigeria; Overcoming Legal and Regulatory Challenges to Foreign Direct Investments in Nigeria: Is the Nigerian Government Doing Enough?

Nigerian Investment Promotion Commission and Foreign Direct Investment in Nigeria

The paper investigates the impact of Nigerian Investment Promotion Commission (NIPC) in attracting Foreign Direct Investment (FDI) to the country. Using a dynamic error correction mechanism models and cointegration approach the paper obtained that the influence of the commission in attracting FDI to the country has not been significant over the period of study. This reason for this result could be attributed to lack of autonomy for this commission and lack of continuity in government policies that has led to neglect of this commission over time. The paper recommends a guided autonomy for the agency and more attention devoted to this commission in order for the commission to play its role of attracting foreign direct investment into the country.

Impact of Foreign Direct Investment on Power Sector of Nigeria: 2000-2011

Foreign direct investment is increasing in importance in the global economy due to the additional resources they pooled for development in the host country. The objective of this study is to ascertain the impact of foreign direct investment (FDI) on power sector in Nigeria using co-integration test, error correction model and time series data as research design. The result indicated that, most of the variables used were significantly related to the power sector output of the country. From the analysis of our study it was found that Foreign Direct Investment as macro-economic variables as well as openness to trade; infrastructural development; inflationary rate had a significant influence on power sector output in Nigeria. The result has an important implication in terms of policies that will attract foreign direct investment to the power sector of the country. We therefore recommend that, having seen that there is long-run relationship between foreign direct investment (FDI) inflow and power sector output in Nigeria and FDI in Nigeria induces the nation’s power sector growth. There is need to encourage FDI in Nigerian power sector and since FDI has the highest potential for contributing growth, it needs to be properly channeled and integrated into the mainstream of the nation’s power sector.

Do Fiscal Incentives Promote Investment?: Empirical Evidence from Nigeria

This study conducts an empirical investigation of the effects of fiscal incentives on investment in Nigeria. We constructed two indexes of fiscal incentives which track the different types and stages of incentives embarked upon since the 1970s and these indexes are then included in both private investment and foreign direct investment equations. The empirical results showed a significant negative effect of fiscal incentives on both private investment and foreign direct investment in Nigeria. Rather than focusing on fiscal incentives, the country should concentrate on removing the factors that discourage investors such as infrastructural bottlenecks, poor institutions and good legal framework.

Macroeconomic Determinants of Foreign Direct Investment and Economic Transformation in Nigeria, 1981–2010: An Empirical Evidence

Foreign direct investment is identified as a major catalyst of economic growth and transformation in developing economies of the world including Nigeria given the investment–savings gap. Over the years, Nigeria has witnessed sustained increase in foreign direct investment in the economy. It is however worrisome that it has not been able to transform the economy to any significant level. Consistent efforts have been made by successive governments in Nigeria that focus on policies that would attract foreign direct investment into the economy but the impact has been dismal. Consequently, the country is still characterised by a high level of unemployment, unstable prices, low per capita income, exchange rate volatility, external imbalances and prevalence of a poverty situation. This article aims at determining the macroeconomic determinants of foreign direct investment and its impact on economic transformation in Nigeria. Secondary data for the period 1981–2011 was used for the investigation. Time series estimates are obtained using Ordinary Least Squares (OLS) methodology which includes: stationary and co-integration tests. It was discovered that market size (GDP), human capital (HCAP), infrastructural development (INFRADEV), inflation (CPI) and index of energy consumption (IEC) are positively related to foreign direct investment in Nigeria. Unstable exchange rates (NEXR), interest rate (INT), under developed financial sector (BSTCR) and low per capita incomes have had negative impact on Foreign Direct Investment in the economy. The research recommends increase in energy consumption through regular supply of electricity, increase in GDP, development of human capital and a critical infrastructure to create a competitive and conducive business environment as well as reduction of exchange rate instability, interest rate distortions and development of the financial sector for a meaningful transformation of the Nigerian economy.

Assessment of the Impacts of Foreign Direct Investment and Interest Rate on the Growth of Nigerian Economy

The study investigated the impact of foreign direct investment in Nigeria. The study employs the cointegration ad error correction mechanism to verify the nature of long run and short run relationship between growth of Nigeria and foreign direct investment. The result indicates that foreign direct investment has both long run and short run significant impacts on the growth of Nigeria. However, among all the variables used exchange rate also proved to have a short run significant impact on the growth of Nigeria and the relationship indicates that currency appreciation might not promote the growth of Nigeria at least in the short run. The policy implication is that efforts to stimulate growth of Nigeria through FDI should be supported with exchange rate policy that will make naira to be over-valued as this may squeeze out the tradable sector of the economy.

The Determinants and Impacts of Foreign Direct Investment in Nigeria

This paper examines the determinants and impact of FDI in Nigeria from 1970 through 2009. As a tool foreconomic development and means of bridging the gaps between the rich and poor nations, emerging economiesgrant special incentives to attract FDI, but the empirical literature is controversial about the effect of FDI on thegrowth and development of emerging economies. This study utilizes the Vector Error Correction Model (VECM)to examine this issue. Granger causality methodology was used to analyze and establish the nature ofrelationship (if any) between FDI and its determinants on one side and economic development on the other. Ourempirical analysis reveals that macroeconomic variables (exchange rate, interest rate, inflation) and openness ofthe economy are among the major and important factors that determine the inflow of FDI into Nigeria duringthese periods. The GDP and government size exhibited positive but insignificant influence on FDI. Theanalysis revealed the presence of a long-run equilibrium relationship between FDI and GDP, but FDI does nothave any significant effect on the growth as well as the development of Nigeria economy during this period. Thestudy therefore recommends that government should ensure stable macroeconomic policies (as motivating factorfor the attraction of FDI into Nigeria) and also increase its expenditure in the area of infrastructural developmentas ways to accelerate the growth of Nigerian economy which will reduce the excessive dependence of Nigeria onFDI.

The Impact of Tax Incentives on Foreign Direct Investment in the Oil and Gas Sector in Nigeria.

The government of oil-rich Nigeria strived to attract Foreign Direct Investment (FDI) through tax incentive, because of its acknowledged advantages as a tool for economic development.However, the trade-off between the sacrificed tax revenue and the expected gains from FDI are inconsistentas there is contentious evidence in the literature that tax incentive is actually the attraction for FDI. This study is aimed at filling this gap, therefore, it examines the impact of tax incentives on foreign direct investments in the oil and gas sector in Nigeria. This study investigates the determinant factors of FDI andanalyse whether or not some selected factors such as tax incentives, availability of natural resources, macro-economic stability, market size, openness to trade, infrastructural development and political riskhave an impact on FDI in the oil and gas sector. Data from a sample size of twenty-one years (21) from the Central Bank of Nigeria annual statistical bulletin and the United Nations Conference On Trade and Development(UNCTAD) reportswere analysed. Karl Pearson coefficient of correlation ‘r’ statistical method of analysiswas employed in analysing the data collected. The results of the analyses show that there is significant impact of tax incentives, availability of natural resources and openness to trade on FDI in the oil and gas sector in Nigeria. Also, there is no significant impact of market size, macro-economic stability, infrastructural developmentand political riskon FDI in the oil and gas sector in Nigeria.This result supports the trend of findings in similar studies in the literature. In view of these findings, the study recommends that in particular attention should be given to institute new regulations to encourage the type of FDI needed to support the economic objectives of vision 20-20-20, such as provision of needed infrastructure especially electricity. This is in order to improve economic growth and the inflow of FDI in Nigeria.

Causality Analysis of the Impact of Foreign Direct Investment on GDP in Nigeria

This study used a Cointegration VAR model to study the Contemporaneous Long – run dynamics of the impact of foreign direct Investment (FDI) on Growth Domestics Products (GDP) with other four macroeconomic variables in the Nigerian Economy for the period of January 1970 to December 2004. The Unit Root Test suggests that all the variables are integrated of order 1. The VAR (3) model were appropriately Identified using AIC information criteria and the VECM (2) model with cointegration relation of exactly one .The study further investigate the causal relationship using the Granger Causality analysis of VECM which indicates a uni–directional causal relationship between GDP and FPI at 5% as in inline with other studies of Basu et al.(2003). The results of Granger Causality Analysis also show that some of the variables are Granger Causal of one another, at 5% level of significance. Having established the fact that foreign direct investment has positive impact on growth domestic product, government should strategize policies that would enhance foreign direct investment in Nigeria.

Exchange Rate Volatility, Inflation Uncertainty and Foreign Direct Investment in Nigeria

This article examines the effect of exchange rate volatility and inflation uncertainty on foreign direct investment in Nigeria. The investigation covers the period between 1970 and 2005. Exchange rate volatility and inflation uncertainty were estimated using the GARCH model. Estimation results indicated that exchange rate volatility and inflation uncertainty exerted significant negative effect on foreign direct investment during the period. In addition, the results show that infrastructural development, appropriate size of the government sector and international competitiveness are crucial determinants of FDI inflow to the country. This enquiry supports the commitment of policymakers to exchange rate and macroeconomic stability as key to FDI boom in Nigeria.

Foreign direct investment and economic growth in Nigeria: a granger causality test

The paper examines the causal relationship between foreign direct investment ( FDI) and economic growth, measured by the gross domestic product (GDP). Augumented Dickey-Fuller (ADF) test was used for the unit root test, Johansen Cointegration test was conducted to establish short and long run relationship between the two variables, ordinary least square (OLS) statistical technique was used to assess the degree of influence the variables have on each other. Finally, Granger causality wasused test to study the direction of causality between the two variables. These techniques were applied on time series data obtained from the Central Bank of Nigeria for a period of 37 years (1970-2007). The conventional view which suggests that the direction of causality runs from FDI to economic growth is true in Nigeria. Empirical findings clearly suggest that GDP causes FDI in Nigeria and vice versa. The contribution of FDI to economic growth is significant.Keywords: Economic growth, FDI, Granger causality, cointegration

Impact of Corporate Governance on Foreign Direct Investment in Nigeria

The United Nation's Millennium Development Goals for Africa suggest the need for these economies to attract substantial amount of foreign direct investments (FDI) to stimulate growth by investing in essential development infrastructures. However, investors are skeptical of opaque corporate governance structures both at firm and macro levels because of the attendant risk to their investments in an environment of weak legal system and poor human right records. Recent events indicate that a number of these economies have realised the importance of good governance systems and the need to signal transparency and accountability both at firm and country levels and have embarked on significant corporate governance reforms. In this paper we did a trajectory of corporate governance reforms in Nigeria and using time series data spanning over a decade we empirically investigated the determinants of foreign capital inflow arguing that in addition to the factors identified in the literature, FDI is positively related to improvement in corporate governance (CG). The paper further argued that although corporate governance prescriptions should be contextualised within the distinctive nature of the developing economies, this should not be stressed too strongly in order not to discourage potential foreign investors. The paper also attempted to identify future directions of the relationship between CG initiatives and FDI in Nigeria.

Evaluation Of Democracy And Foreign Investment In Nigeria

This paper contends that a good indicator of confidence in the stability of Nigerian economy is the significant inflow of foreign direct investment. Foreign capital inflow to Nigeria in recent years has not been significant. The object of the paper is to examine how the current democracy contributed significantly to improvement in overall domestic and foreign investment in Nigeria. The assumption of the study are that the deregulatory policy of the current democratic government will not stimulate significant foreign investment. Using descriptive historical and content approach and chi-square methodology of statistical analysis, the study reveals that the new democratic government of president Obasanjo continues to create an enabling environment for domestic and foreign direct investment in Nigeria. The policy initiative has encouraged the agro-based industries and telecommunication. In the telecommunications, the introduction of GSM phones, wireless tech, and Internet Service has improved communication. Journal of Research in National Development Vol. 3 (2) 2005: pp. 87-95

Determinants of Foreign Direct Investment in Nigeria: Political Factor Effect Revisited

The paper examines the determinants of Foreign Direct Investment (FDI) in Nigeria during 1970 – 2006. cointegration techniques reveal that the major determinants of FDI are market size, real exchange rate and political factor thereby validating theoretical expectations. Furthermore, simulations using impulse response and variance decomposition analysis suggest that uncontrolled trade liberalization must be avoided.