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An Empirical Analysis Of Institutional Quality And Foreign Direct Investment Inflows In Nigeria

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  • Idris Abiodun Adenuga

    (Department of Economics, Faculty of Social Sciences, Lagos State University, Ojo, Lagos, Nigeria)

Abstract

This study investigated the relationship between the measures of institutional quality provided by the World Bank, World Governance Indicators and foreign direct investment inflows in Nigeria. The study used time-series data covering the period between 1996 and 2019. We sourced the data from the World Bank, World Development Indicators and World Governance Indicators databases. The measures of institutional quality used along with other selected control variables include voice and accountability, government effectiveness, rule of law, regulatory quality, control of corruption, political stability and the composite of these six variables. In order to control for endogeneity problem, we employed generalized method of moments (GMM) estimation for this study. The empirical results from GMM show that the composite institutional index, control of corruption, voice and accountability, government effectiveness, rule of law, and regulatory quality has a positive and insignificant effect on foreign direct investment inflows into Nigeria, while political stability has a negative and insignificant effect on foreign direct investment inflows. In light of these findings, this study concluded that the amount of foreign direct investment inflows into Nigeria reflect the poor institutional quality prevalent in Nigeria. This study therefore recommended that the Nigerian government should intensify measures to improve the institutional quality of Nigeria.

Suggested Citation

  • Idris Abiodun Adenuga, 2023. "An Empirical Analysis Of Institutional Quality And Foreign Direct Investment Inflows In Nigeria," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 8(1), pages 8-18, March.
    • Handle: RePEc:ora:jrojbe:v:8:y:2023:i:1:p:8-18
    DOI: http://doi.org/10.47535/1991ojbe160
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    References listed on IDEAS

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    1. Simplice Asongu & Uduak S. Akpan & Salisu R. Isihak, 2018. "Determinants of foreign direct investment in fast-growing economies: evidence from the BRICS and MINT countries," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-17, December.
    2. Akpan, Uduak & Isihak, Salisu & Asongu, Simplice, 2014. "Determinants of Foreign Direct Investment in Fast-Growing Economies: A Study of BRICS and MINT," MPRA Paper 56810, University Library of Munich, Germany.
    3. Turan Subasat & Sotirios Bellos, 2013. "Governance and foreign direct investment in Latin America: A panel gravity model approach," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 50(1), pages 107-131, May.
    4. Buchanan, Bonnie G. & Le, Quan V. & Rishi, Meenakshi, 2012. "Foreign direct investment and institutional quality: Some empirical evidence," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 81-89.
    5. Najeh Bouchoucha & Saloua Benammou, 2020. "Does Institutional Quality Matter Foreign Direct Investment? Evidence from African Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(1), pages 390-404, March.
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    More about this item

    Keywords

    FDI inflows; institutional quality; WGIs; GMM; Nigeria;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F00 - International Economics - - General - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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