SOME MACRO-ECONOMIC DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN NIGERIA

Abstract

This study examined some macro-economic determinants of FDI in Nigeria for the period 1981 to 2017 with data from the Central Bank of Nigeria (CBN) Statistical Bulletin (2017) and the World Bank Report (2017). In order to achieve the objectives of this study, the study employed the Autoregressive Distributive Lag (ARDL) Bounds Testing Approach to co-integration analysis. The results revealed that gross domestic products, infrastructural development, inflation rate, deregulation and openness of the economy to foreign trade have positive and significant impacts on Foreign Direct Investment (FDI) in Nigeria whereas Exchange Rate, Interest Rate and political instability are not as effective. The ARDL Bounds Test result reveals an existence of unique co-integration among the variables used.The long run estimates reveal that a 1% increase in infrastructural development leads to a 55% increase in the level of FDI, whereas in the short run it leads to a 50% increase. More so, a 1-unit increase in the level of GDP in the long run shall lead to a 2.2-unit increase in FDI and a 10-unit increase in the short run. The ECM test result which was properly signed reveals a speed adjustment rate of 96%. The policy import of the study is that gross domestic products, infrastructural developments, openness of the economy are very imperative and should be substantially improved upon increased substantially to attract increased foreign direct investment. Policy makers should formulate policies that will reduce exchange rate adequately and avoid political instability.