DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN NIGERIA
Abstract
ABSTRACT
The research investigates the determinants of foreign direct investment (FDI) in Nigeria over the period for 1980-2007. Cochrane Ocutt method of regression was utilized in the study. The findings indicate that exchange rate (economic factor) and political instability are the crucial determinants of FDI in Nigeria.
Domestic market size (represented by GDP), openness to trade and inflation are insignificant determinants of FDI.
The regression model however, showed a significant fit with f-value of 36. 521 and adjusted R2 of 0.93 at 0.05 confidence level. It was also observed in the result that the behaviour of GDP and inflation to FDI is contrary to theoretical and empirical expectation of positive and negative relationship respectively.
The findings suggest that policy measures, primarily directed at efficient exchange rate management and minimal political risk, would promote FDI flow in the country.
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