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Foreign Direct Investment (Fdi): Determinants And Growth Effects In A Small Open Economy

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  • Olajide S. Oladipo

Abstract

In an attempt to attract foreign direct investment, many African countries embarked on various reforms. Nigeria, like many African countries, took some steps towards trade reforms and macroeconomic regime and introduced measures aimed at improving the FDI regulatory framework. In the form of stocktaking, this study examines the determinants of FDI, the causal relationship among factors affecting economic growth in Nigeria, including the formal investigation of the export-led and FDI-led growth hypotheses in Nigeria for the period between 1970 and 2005. We found that Nigeria’s potential market size, the degree of export orientation, human capital, providing enabling environment through the provision of infrastructural facilities, and macroeconomic stability are important determinants of FDI flows. Further, our results confirms that foreign direct investment leads to economic growth and that government consumption expenditure, openness to international trade and human capital are complementary to economic growth. Controlling for domestic investment growth as well as other factors, causality tests show support for both the export-led growth and FDI-led growth hypotheses for Nigeria.

Suggested Citation

  • Olajide S. Oladipo, 2010. "Foreign Direct Investment (Fdi): Determinants And Growth Effects In A Small Open Economy," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(4), pages 75-88.
    • Handle: RePEc:ibf:ijbfre:v:4:y:2010:i:4:p:75-88
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    2. Kottaridi, Constantina & Louloudi, Konstantina & Karkalakos, Sotiris, 2019. "Human capital, skills and competencies: Varying effects on inward FDI in the EU context," International Business Review, Elsevier, vol. 28(2), pages 375-390.
    3. Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
    4. Garavito-Acosta, Aarón Levi & Iregui-Bohórquez, Ana María & Ramírez-Giraldo, María Teresa, 2013. "Inversión extranjera directa en Colombia : evolución, indicadores y determinantes por firma," Chapters, in: Rincón-Castro, Hernán & Velasco, Andrés M. (ed.), Flujos de capitales, choques externos y respuestas de política en países emergentes, chapter 3, pages 83-136, Banco de la Republica de Colombia.
    5. Brandon D. Lundy & Mark Patterson & Alex O'Neill, 2017. "Drivers and deterrents of entrepreneurial enterprise in the risk-prone Global South," Economic Anthropology, Wiley Blackwell, vol. 4(1), pages 65-81, January.
    6. Aarón Garavito A. & Ana María Iregui B. & María Teresa Ramírez G., 2012. "Determinantes de la inversión extranjera directa en Colombia: Un estudio a nivel de firma," Borradores de Economia 9672, Banco de la Republica.
    7. Aarón Garavito A. & Ana María Iregui B. & María Teresa Ramírez G., 2012. "Determinantes de la inversión extranjera directa en Colombia: Un estudio a nivel de firma," Borradores de Economia 714, Banco de la Republica de Colombia.
    8. Aarón Garavito & Ana María Iregui & María Teresa Ramírez, 2014. "An Empirical Examination of the Determinants of Foreign Direct Investment: A Firm-Level Analysis for the Colombian Economy," Revista de Economía del Rosario, Universidad del Rosario, June.
    9. Padilla, Ramón & Gomes Nogueira, Caroline, 2015. "Determinants and home-country effects of FDI outflows: Evidence from Latin American countries," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 38914, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

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    More about this item

    Keywords

    Foreign Direct Investment; Exports; Growth;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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