FDI Inflow and Insecurity in Nigeria: An Empirical Analysis

This paper empirically examines the impact of defence and security on foreign direct investment (FDI) in Nigeria using quarterly historical data covering the period of 1994q1-2019q4 and an ARDL and VAR econometric techniques are adopted as tools of data analysis. The results from both econometric approaches revealed that foreign direct investment responds negatively to the exogenous occurrence of security threats both in the short and long runs. Also, economic instability and uncertainty are shown to cause drag in foreign direct investment inflow in Nigeria. This study further shows that economic liberalization, proxy with trade openness, and economic progress, proxy with the growth of gross domestic product per capita contribute immensely to the flow of foreign direct investment into Nigeria. The study recommendations drawn from the findings are that national security challenges should be addressed without delay by the government at all the tiers levels to change the course of the downward trend of FDI in Nigeria; establish risk adverting policy to reduce economic uncertainty; promote price stability policy to reduce economic instability; diversifying the economy to further increase economic progress which greatly drives FDI inflow, and encourage economic liberalization which brings benefit through market expansion.