Factors Determining FDI in Nigeria: An Empirical Investigation

Abstract:     
This paper investigates the recent surge of FDI in Nigeria, which is poor in terms of income but rich in natural resources. This study examines empirically whether FDI is resource seeking in Nigeria and its determining factors. Applying time series technique this paper observes that FDI flow to Nigeria is resource-seeking FDI during 1970-2006. In long run, the natural resource outflow, market size and openness have direct impact on FDI inflow while risk factors like inflation rate and foreign exchange rate have indirect effect. Finding in long run supports the literature. The contribution of this paper is the short run dynamics among major macroeconomic variables and direction of their causal linkage. It should be helpful for policy makers and macroeconomics managers for managing the nation.

Keywords: FDI, Natural resource export, exchange rate, openness, inflation rate, VECM

JEL Classification: C13, F18, Q32, O13, Q43

working papers series